Shadow economy in Malaysia

A state level analysis

Research output: Contribution to journalArticle

Abstract

Literature on the estimation of the size of shadow economy at national level is well studied. However, estimation of the size of shadow economy at state level is still scarce. This study attempts to estimate the size of shadow economy to state GDP ratio for the states of Malaysia by employing the Multiple - Indicators - Multiple - Causes (MIMIC) model using panel data from 13 states of Malaysia from 2006 to 2013. Additionally, the relationship between size of state shadow economy and other state level variables was investigated and analysed. Several findings were obtained. First, rural population and rural labour play significant roles in contributing to the development of shadow economy in the states of Malaysia. Second, smaller and more advanced states have smaller shadow economy to state GDP ratio, while the two East Malaysia states, Sabah and Sarawak, are by far the states with the largest shadow economy to state GDP ratio among all Malaysia states. Third, shadow economy is positively affected by crime index and primary sector productions, and negatively affected by state GDP growth. State shadow economy decreases if the state is ruled by opposition party. This study suggests better regulations in rural economy, rural labour, criminal activities and primary sector contributions to reduce shadow economy activities in the states of Malaysia.

Original languageEnglish
Pages (from-to)1365-1382
Number of pages18
JournalPertanika Journal of Social Sciences and Humanities
Volume25
Issue number3
Publication statusPublished - 1 Sep 2017

Fingerprint

shadow economy
Malaysia
primary sector
Shadow economy
Economy
labor
small state
rural population
role play
opposition

Keywords

  • Malaysia
  • MIMIC
  • State shadow economy

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Arts and Humanities(all)
  • Social Sciences(all)
  • Economics, Econometrics and Finance(all)

Cite this

Shadow economy in Malaysia : A state level analysis. / Yap, W. W.; Sarmidi, Tamat; Md Nor, Abu Hassan Shaari; Said, Fathin Faizah.

In: Pertanika Journal of Social Sciences and Humanities, Vol. 25, No. 3, 01.09.2017, p. 1365-1382.

Research output: Contribution to journalArticle

@article{3f0446a25b3c4c169023b4bf1fc0e33c,
title = "Shadow economy in Malaysia: A state level analysis",
abstract = "Literature on the estimation of the size of shadow economy at national level is well studied. However, estimation of the size of shadow economy at state level is still scarce. This study attempts to estimate the size of shadow economy to state GDP ratio for the states of Malaysia by employing the Multiple - Indicators - Multiple - Causes (MIMIC) model using panel data from 13 states of Malaysia from 2006 to 2013. Additionally, the relationship between size of state shadow economy and other state level variables was investigated and analysed. Several findings were obtained. First, rural population and rural labour play significant roles in contributing to the development of shadow economy in the states of Malaysia. Second, smaller and more advanced states have smaller shadow economy to state GDP ratio, while the two East Malaysia states, Sabah and Sarawak, are by far the states with the largest shadow economy to state GDP ratio among all Malaysia states. Third, shadow economy is positively affected by crime index and primary sector productions, and negatively affected by state GDP growth. State shadow economy decreases if the state is ruled by opposition party. This study suggests better regulations in rural economy, rural labour, criminal activities and primary sector contributions to reduce shadow economy activities in the states of Malaysia.",
keywords = "Malaysia, MIMIC, State shadow economy",
author = "Yap, {W. W.} and Tamat Sarmidi and {Md Nor}, {Abu Hassan Shaari} and Said, {Fathin Faizah}",
year = "2017",
month = "9",
day = "1",
language = "English",
volume = "25",
pages = "1365--1382",
journal = "Pertanika Journal of Social Science and Humanities",
issn = "0128-7702",
publisher = "Universiti Putra Malaysia",
number = "3",

}

TY - JOUR

T1 - Shadow economy in Malaysia

T2 - A state level analysis

AU - Yap, W. W.

AU - Sarmidi, Tamat

AU - Md Nor, Abu Hassan Shaari

AU - Said, Fathin Faizah

PY - 2017/9/1

Y1 - 2017/9/1

N2 - Literature on the estimation of the size of shadow economy at national level is well studied. However, estimation of the size of shadow economy at state level is still scarce. This study attempts to estimate the size of shadow economy to state GDP ratio for the states of Malaysia by employing the Multiple - Indicators - Multiple - Causes (MIMIC) model using panel data from 13 states of Malaysia from 2006 to 2013. Additionally, the relationship between size of state shadow economy and other state level variables was investigated and analysed. Several findings were obtained. First, rural population and rural labour play significant roles in contributing to the development of shadow economy in the states of Malaysia. Second, smaller and more advanced states have smaller shadow economy to state GDP ratio, while the two East Malaysia states, Sabah and Sarawak, are by far the states with the largest shadow economy to state GDP ratio among all Malaysia states. Third, shadow economy is positively affected by crime index and primary sector productions, and negatively affected by state GDP growth. State shadow economy decreases if the state is ruled by opposition party. This study suggests better regulations in rural economy, rural labour, criminal activities and primary sector contributions to reduce shadow economy activities in the states of Malaysia.

AB - Literature on the estimation of the size of shadow economy at national level is well studied. However, estimation of the size of shadow economy at state level is still scarce. This study attempts to estimate the size of shadow economy to state GDP ratio for the states of Malaysia by employing the Multiple - Indicators - Multiple - Causes (MIMIC) model using panel data from 13 states of Malaysia from 2006 to 2013. Additionally, the relationship between size of state shadow economy and other state level variables was investigated and analysed. Several findings were obtained. First, rural population and rural labour play significant roles in contributing to the development of shadow economy in the states of Malaysia. Second, smaller and more advanced states have smaller shadow economy to state GDP ratio, while the two East Malaysia states, Sabah and Sarawak, are by far the states with the largest shadow economy to state GDP ratio among all Malaysia states. Third, shadow economy is positively affected by crime index and primary sector productions, and negatively affected by state GDP growth. State shadow economy decreases if the state is ruled by opposition party. This study suggests better regulations in rural economy, rural labour, criminal activities and primary sector contributions to reduce shadow economy activities in the states of Malaysia.

KW - Malaysia

KW - MIMIC

KW - State shadow economy

UR - http://www.scopus.com/inward/record.url?scp=85031278207&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85031278207&partnerID=8YFLogxK

M3 - Article

VL - 25

SP - 1365

EP - 1382

JO - Pertanika Journal of Social Science and Humanities

JF - Pertanika Journal of Social Science and Humanities

SN - 0128-7702

IS - 3

ER -