Does national intellectual capital matter for shadow economy in the Southeast Asian countries?

• Published in: PloS one Vol. 17; no. 5; p. e0267328
• Main Authors: Tran, Toan Pham-Khanh, Nguyen, Phuc Van, Nguyen, Quyen Le-Hoang-Thuy-To, Tran, Ngoc Phu, Vo, Duc Hong
• Format: Journal Article
• Language: English
• Published: United States Public Library of Science 11.05.2022; Public Library of Science (PLoS)
• Subjects: Analysis; Causality; Competitive advantage; COVID-19; Data analysis; Digital economy; Economic activity; Economic development; Economic growth; Economic indicators; Economic policy; Economics; Empirical analysis; Evaluation; Expenditures; GDP; Global economy; Government spending; Gross Domestic Product; Growth; Homogeneity; Informal economy; Intellectual capital; Least squares; Literature reviews; Macroeconomics; Panel data; People and Places; Policies; Shadows; Social Sciences; Tax evasion; Taxation; Underground economy; Asia
• ISSN: 1932-6203; 1932-6203
• DOI: 10.1371/journal.pone.0267328

Understanding the determinants of the shadow economy plays a vital role in formulating policies for economic growth and development, particularly for the Southeast Asian countries-a new economic force for a global economy. The key drivers of a shadow economy, such as institutional quality, taxation, government expenditure, are widely examined. However, the effect of national intellectual capital, which affects macroeconomic indicators, on the shadow economy has largely been ignored in the existing literature. Our paper examines this critical link and its causality relationship for eight Southeast Asian countries from 2000 to 2017. This paper uses the dynamic ordinary least squares (DOLS) and fully modified ordinary least squares (FMOLS), which allow cross-sectional dependence and slope homogeneity in panel data analysis. Empirical findings from this paper indicate that national intellectual capital impacts negatively and significantly the shadow economy size. This finding implies that enhancing national intellectual capital reduces the shadow economy size. These two forces lead to enhanced economic growth. Our Granger causality tests confirm a bi-directional relationship between national intellectual capital and the shadow economy. As a result, policies targeted to reduce the shadow economy size can now include the accumulation of national intellectual capital, particularly for Southeast Asian Countries.