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Purpose: The present research aims at identifying the latent factors that are driving the rise of the shadow economy in Palestine, assesses its magnitude from 1998 to 2021 and investigates the influence that its size has on the financial sustainability of Palestine's public budget. Design/methodology/approach: The researchers employed the multi-indicator multi-causes (MIMIC) model to estimate the size of the shadow economy and investigate its effect on the financial sustainability of the public budget. Economic factors such as direct taxes, indirect taxes, government welfare, government spending and unemployment were considered causal variables, while indicators of financial sustainability included budget deficit, public debt and gross domestic product (GDP). The shadow economy served as an intermediary variable. Findings: Based on the findings, the researchers recommend regulating and formalizing legitimate activities within the shadow economy. Additionally, they suggest promoting investment projects to reduce unemployment rates, lowering taxes on essential goods and consumer items and providing support to local producers in Palestine. These measures aim at addressing the challenges posed by the shadow economy and fostering economic stability. Originality/value: The study reveals that the average size of the shadow economy in Palestine between 1998 and 2021 was 43.80%, fluctuating within the range of 39.92%–46.30%. It further establishes that an increase in direct and indirect taxes as well as unemployment contributes to the expansion of the shadow economy. Conversely, government welfare and spending exert a diminishing effect. Moreover, the study finds that the rise of the shadow economy correlates with an increase in public debt, budget deficit and GDP, indicating a negative impact on the financial sustainability of the public budget. [ABSTRACT FROM AUTHOR]

Purpose: Following the COVID-19 outbreak, there are concerns whether economies are becoming farther from equality and competency. While this matters to every economy, it is more crucial for developing ones who already suffer from income inequalities and lack of competency. The purpose of this paper is to address this issue. Design/methodology/approach: This study uses an administrative data from the Iran's Social Security Organization (ISSO) that provides insurance to workers entitled to the Labor Law of Iran. The data contain more than 7,000,000 workers. The authors assess heterogeneous impact of the first wave of the pandemic by firms' size and average payment. Findings: The authors' estimation results indicate that, following the initiation of the pandemic, the workers whose corresponding firms are smaller, overall, are more prone to the pandemic and are more likely to submit a request for unemployment benefits. However, the relation is neither homogeneous across sectors nor linear among micro-sized firms. Few sectors indicate a positive relationship between size and likelihood of request submission, including cultural activity, shoemaking and clothing sectors. Besides the size, the authors investigate whether pay grades could explain the probability of becoming unemployed after the pandemic. Results show that workers whose corresponding firms pay less are more likely to submit a request. This is robust within different sectors. Research limitations/implications: The ISSO dataset is not a panel, so the authors cannot employ methods of causal inferences. The authors' results should be seen as correlation; however, due to exogeneity and sharpness of the pandemic the result infers to some degree of causality. The data does not cover the informal sector, so the estimates are at lower boundary. Originality/value: Administrative data on unemployment benefits during COVID-19 show that the pandemic interferes with competition by forcing low-paid workers and small firms to exit the market. This is an alarm for the competition in every economy, specially developing ones. [ABSTRACT FROM AUTHOR]

Purpose: Do financial services needs depend on the firm size? To highlight the impact of different categories of financial services on firm performance, we establish a correspondence between financial services and firms' performance classified according to their size, controlling with the determinants of firm performance and the obstacles that hinder the development of each category of firm. Design/methodology/approach: We have mobilized microeconomic data on 78,629 firms stratified by size and covering 135 countries, extracted from the Enterprise Surveys database. A two-stage least squares (2SLS) regression analysis with instrumental variable modeling is used. Findings: Our empirical results show that a firm's financing behavior differs according to its size. For micro and small firms, the availability of internal financing has a positive impact on their performance. For medium-size firms, the use of debt stimulates firm performance. For large firms, the positive effect of debt diminishes as the level of debt increases, which leads this category of firms to increase their capital. We complemented our study by exploring the issue of whether barriers to firm performance differ by size. Our results bring a support to the idea that medium-size firms suffer more than micro, small, and large firms. The size of this category of firms does not allow them to operate in the informal sector as micro and small firms do, and does not allow them to influence political authorities to operate in their favor as large firms do. Originality/value: Previous studies have focused on investigating the effects of access to finance and/or financing constraints on firm's performance, neglecting the issue of identifying which financial services have the most impact on firm performance depending on firms' size. This study fills the gap in the literature in two main ways. First, we identify the financial services that have the most impact on firm performance using firm-level data covering 78,629 firms by size (micro, small, medium, and large). Second, we investigate the different barriers to firm performance by size. [ABSTRACT FROM AUTHOR]

Purpose: The purpose of this paper is to analyze the relationship between macroeconomic fundamentals, intuitional quality and shadow economy. Design/methodology/approach: By utilizing data setspanning from 2004 to 2015 of 141 countries, the study has employed advanced panel technique, i.e. Generalized Method of Moments (GMM) method. In order to check consistency of the results, the study also used fixed effect and random effect for robustness. Findings: The study finds that for the full sample, institutional quality has negative effect on shadow economy while macroeconomic fundaments effect shadow economy differently. After splitting the sample into Organization of Islamic Cooperation (OIC) and non-OIC countries subsamples, it observes same influence of macroeconomic fundaments and institutional quality on shadow economy, but the effect of macroeconomic fundaments and institutional quality on shadow economy is less observed for OIC countries. The results are found consistence by using different estimation methods. Originality/value: The current literature has focused on estimating the size of shadow economy and literature linking the macroeconomic fundaments, institutional quality and shadow economy is scarce. Additionally, this study provides the evidence for cross comparison between OIC economies and non-OIC economies. [ABSTRACT FROM AUTHOR]

Purpose: Despite a widespread assertion that wages are lower in the informal than formal economy, there have been few empirical evaluations of whether this is the case and even fewer studies of the gender variations in wage rates in the formal and informal economies. Consequently, whether there are wage benefits to formal employment for men and women is unknown. The aim of this paper is to evaluate the wage differential between formal and informal employment for men and women. Design/methodology/approach: To evaluate the wage differential between the formal and informal economy for men and women, data are reported from a 2017 survey involving 8,533 household interviews conducted in Kosovo. Findings: Using decomposition analysis and after controlling for other determinants of wage differentials, the finding is that the net hourly earnings of men in formal employment are 26% higher than men in informal employment and 14% higher for women in formal employment compared with women in informal employment. Practical implications: Given the size of the wage differential, the costs for employers will need to significantly increase in terms of the penalties and risks of detection if informal employment is to be prevented, along with more formal employment opportunities using active labour market policies for vulnerable groups, perhaps targeted at men (who constitute 82.8% of those in informal employment). Originality/value: This is one of the first studies to evaluate the differentials in wage rates in the formal and economy from a gender perspective. [ABSTRACT FROM AUTHOR]

Purpose: The dominant theorisation of the informal economy views participants as rational economic actors operating in the informal economy when the expected benefits exceed the perceived costs of being caught and punished. Recently, an alternative theory has emerged which views participants as social actors operating in the informal economy due to their lack of vertical trust (in governments) and horizontal trust (in others). The aim of this paper is to evaluate these competing theorisations. Design/methodology/approach: To do so, data are reported from special Eurobarometer surveys conducted in 2007, 2013 and 2019 in eight West European countries (Austria, Belgium, France, Germany, Ireland, Luxembourg, the Netherlands and the United Kingdom). Findings: Using probit regression analysis, the finding is that increasing the expected likelihood of being caught and level of punishment had a weak significant impact on the likelihood of participating in the informal economy in 2007, and there was no significant impact in 2013 and 2019. However, greater vertical and horizontal trust is significantly associated with a lower level of participation in the informal economy in all three time periods. Practical implications: The outcome is a call for a policy to shift away from increasing the expected level of punishment and likelihood of being caught, and towards improving vertical and horizontal trust. How this can be achieved is explored. Originality/value: Evidence is provided in a Western European context to support a shift away from a rational economic actor to a social actor approach when explaining and tackling the informal economy. [ABSTRACT FROM AUTHOR]