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The role of refugees in the underground economy of the European Union

Abstract : Abstract This paper explores the impact of refugees on the size of the underground economy in 28 European Union countries over the period from 1998 to 2017. It applies a nonlinear methodology by employing dynamic panel threshold estimations. The main findings uncover a nonlinear connection between refugees and the informal economy with an inverted V-shape and a different magnitude of effects depending on the share of the refugee population. The underground economy is stimulated at a low level of refugee inflows (where immigrants make up <0.572% of the total population). Large inflows compress the underground economy, which increases competition in the labor market based on lower labor costs. Economic growth and international trade play a crucial role in reducing the size of the informal economy. Equally importantly, coherent unemployment policy and adequate regulation of illegal immigrants support this process.
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https://hal-univ-orleans.archives-ouvertes.fr/hal-03858127
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Submitted on : Thursday, November 17, 2022 - 3:59:29 PM
Last modification on : Monday, November 21, 2022 - 7:41:24 PM

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Mihai Mutascu, Scott Hegerty. The role of refugees in the underground economy of the European Union. IZA Journal of Development and Migration, 2022, 13 (1), ⟨10.2478/izajodm-2022-0002⟩. ⟨hal-03858127⟩

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