The impact of e-government on reducing the shadow economy and corruption

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    Project Manager :
    João Martins

    The shadow economy (SE) and corruption represent serious problems in many countries, especially in the developing world. SE can be defined as economic activities that escape detection in the official estimates of the Gross Domestic Product. Among others, the SE erodes the tax bases and reduces the tax revenue forcing the governments to find other sources of revenue to finance public spending. By its turn, corruption has been empirically demonstrated to be associated to a lower attraction of foreign direct investment and trust in elected officials, ultimately affecting economic growth.

    The SE is a complex phenomenon with regards to its definition, measurement, potential impacts and causes. The purpose of this project is to investigate a possible role of digital government in reducing the SE. The implementation of eGov may allow the government to reduce the administrative burden costs, reduce tax evasion, and allow citizens to act as whistleblowers, all of which may eventually lower the size of the shadow activities. Similarly, as electronic records of public sector’s activities are easier to store, access and disseminate than paper-bases ones, eGov facilitates audits and increases the probability of detection of misbehavior in the public sector, decreasing civil servant’s incentives to engage in corrupt activities.

    The project aims to answer the following research questions. First, does the implementation of eGov policies contribute to the reduction of the SE and corruption? Second, is there a threshold point by which eGov development is more effective in reducing the SE and corruption? The analysis of both the SE and the corruption topic, although divided in different pieces of research, are both carried out on large panels of countries, at different levels of income and regions and mainly contrasting developed and developing countries.

    • João Martins João Martins Senior Research Assistant
      Project Manager
    • Veiga Linda