UNDERSTANDING THE ‘SHADOW ECONOMY’ IN SMES – A MALPRACTICE FROM INDONESIA, 2009-2020

<p>Concerns about the shadow economy in Indonesia, estimated to have hurt GDP by around 25% per year. We try to calculate the effect of the components involved in tax revenue caused by the shadow economy because we projected it to hinder the growth of SMEs. It aimed the orientation at Indonesia. We got data coverage from official institutions of national and international related to variable limits. We observe the development in the period 2009-2020, which requires linear regression analysis methods and non-linear logistic regression. The results confirm that among the six hypotheses we propose, five hypotheses are acceptable, i.e. FDI has a significant effect on the share of SMEs, corruption perceptions and control of corruption have a significant effect on income and profit taxes, then it also has a significant effect on the shadow economy, and the shadow economy also has an effect significant to tax revenue. From other findings, only the share of SMEs has no significant effect on income and profit taxes. The added value of this empirical finding can reduce the weaknesses of previous studies that predominantly consider financial (tax) and economic dimensions so that variables such as SMEs, corruption control, and public perceptions of corruption.</p>

Mediating role of trust in the relationship between public governance quality and tax compliance

This paper examined the mediating role of trust in government on the influence of public governance quality indicators (accountability, political stability, government effectiveness, regulatory quality, rule of law, and control of corruption) on tax compliance in Africa. Cross-country data obtained from 38 African countries for 2015 was used and analyzed using Ordinary Least Squares (OLS) regression analysis. The study found that accountability, political stability, control of corruption, and trust have a significant influence on tax compliance among the sampled African countries, but government effectiveness, regulatory quality, and the rule of law and have insignificant influence on tax compliance. The result of the mediating effects revealed that trust mediates the influence of accountability and political stability on tax compliance in Africa. However, it failed to mediate the influence of government effectiveness, regulatory quality, rule of law, and control of corruption on tax compliance among sample African countries. The study offers theoretical insights on the role of trust as a mediator on social exchange relationships from the context of public governance quality on tax compliance. It also implies to the policymakers that building trust is an important mechanism through which the impact of public governance on tax compliance would be more pronounced. The study further calls for replication of its findings in other continents such as the Americas, Asia, and Europe.

Assessing the impact of institutions on economic growth in the BRICS countries

This study examines the impact of institutional quality on economic performance in the BRICS countries for the period from 2002 to 2019. The panel data study was estimated using pooled OLS and a fixed effect model. The study employed six institutional quality indicators (Worldwide Governance Indicators) which included voice and accountability, political stability and absence of violence/terrorism, government effectiveness, regulatory quality, rule of law, and control of corruption. The study also controlled for conventional sources of growth, i.e. human capital, physical capital, government expenditure, and inflation. All of these factors were positive and significant in our study. The findings also reveal that government effectiveness, regulatory quality and control of corruption had a positive and significant impact on economic growth in the BRICS countries, whereas other institutional variables turned out to be insignificant.

Institutional Quality and Industrial Growth: A Causality Analysis

The research study investigates the causal links between institutional quality and industrial output growth in Nigeria for the periods 1996:Q1-2018:Q4. Institutional quality was delineated into three i.e. economic institution (government effectiveness, regulatory quality, rule of law, and control of corruption), financial institution (contract intensive money, lending rate, and financial deepening), and political institution (voice and accountability, and political stability and absence of violence). The study computed the Granger causality test using both the VECM and the Toda and Yamamoto [1] and Dolado and Lutkepohl [2] (TYDL) augmented VAR procedure. The causality result in the short run showed that none of the institutional quality variables have a causal effect on industrial output growth but the feedback was reported. In the long run, a bi-causal relationship was reported from government effectiveness, control of corruption, financial deepening, and voice and accountability to industrial growth, whereas, a one-way directional relation was found running from industrial growth to regulatory quality and political stability & absence of violence. Thus, there is a need for the government to intensify efforts towards improving the extent people can challenge her power and authority because these play significant roles in the development level of Nigerian industries.

Determinants of Political Stability to Support Foreign Investment in Indonesia

What investors often consider before deciding to invest in various countries is the political situation. The risks faced by investors in the event of political instability are regulatory changes, legal disputes, forced takeovers of companies, disruption to regional stability, policies against acts of terrorism, and changes in state ideology. The purpose of this study is to find a determinant of political stability in Indonesia that will be useful for investors and multinational companies, and the government in maintaining political stability. Systematic secondary data sampling from January 2015 to December 2019 was used for explanatory study purposes and to build a model. This study concludes that the rule of law, control of corruption, and oil prices have a significant effect on political stability in Indonesia, while the inflation rate does not have a significant effect on political stability in Indonesia. The novelty of this research is the formation of a political stability model for Indonesia and why an increase in control of corruption actually has a negative effect on political stability in Indonesia.

Determinants and Cross-National Moderators of Wearable Health Tracker Adoption: A Meta-Analysis

Wearable health trackers improve people’s health management and thus are beneficial for social sustainability. Many prior studies have contributed to the knowledge on the determinants of wearable health tracker adoption. However, these studies vary remarkably in focal determinants and countries of data collection, leading to a call for a structured and quantitative review on what determinants are generally important, and whether and how their effects on adoption vary across countries. Therefore, this study performed the first meta-analysis on the determinants and cross-national moderators of wearable health tracker adoption. This meta-analysis accumulated 319 correlations between nine determinants and adoption from 59 prior studies in 18 countries/areas. The meta-analytic average effects of the determinants revealed the generalized effect and the relative importance of each determinant. For example, technological characteristics generally had stronger positive correlations with adoption than consumer characteristics, except for privacy risk. Second, drawing on institutional theory, it was observed that cross-national characteristics regarding socioeconomic status, regulative systems, and cultures could moderate the effects of the determinants on adoption. For instance, the growth rate of gross domestic product decreased the effect of innovativeness on adoption, while regulatory quality and control of corruption could increase this effect.

Economic Growth in the Western Balkans: A Panel Analysis

This paper investigates how typical macroeconomic indicators affect the economic growth of Western Balkans countries. A static panel empirical investigation for the period 2010 to 2019 has been conducted using GDP growth rate as the dependent variable, while independent variables in focus include foreign direct investments, remittances, unemployment rate, population growth rate, and control of corruption. The most interesting finding is that a rising share of remittances positively affects economic growth. This might indicate that even when remittances are used for non-investment purposes, they might increase domestic production of consumption and intermediate goods. There is also evidence of a non-linear relationship between FDI and economic growth, which may be a consequence of undeveloped capacities to use the positive side of FDI. To foster economic growth policy-makers should focus on reforms that target sectors that show sharp declines in FDI and remittances inflows, including also a need for better control of corruption in the region.

The influence of the ICT on the control of corruption in public administrations of the EU member states: a comparative analysis based on panel data

Developments in Information and Communication Technology (ICT) have led to major changes in public administration in all democratic states. The fact that information can be made public and accessible from anywhere, at any time, requires a new approach to the process of computerization of public administration. The objective of the research was to know the influence of ITC integration in the EU state administrations on corruption control in the period 2010 - 2019. We selected four relevant variables, which we integrated in a panel analysis including the 27 EU member states. Using STATA we made an econometric model on panel data and obtained interesting results from a scientific point of view. The results show that the integration of ICTs in the EU public administrations has significantly contribution to reducing corruption These results demonstrate the need to accelerate the digitization of administrations and create an integrated model of government cloud in the European administrative space. In addition, the results of the research highlight the differences between EU states in terms of the impact of ICTs on government efficiency and economic development.

Effectiveness of the Extractive Industries Transparency Initiative

<p>I investigate two aspects of the Extractive Industries Transparency Initiative (EITI). The first issue is the effectiveness of the EITI in mitigating corruption in EITI implementing countries. The second issue is the economic value of extractive companies’ information disclosed under the EITI implementation regime. I address the first issue by examining the influence of EITI implementation experience on the perceived control of corruption in EITI implementing countries. Specifically, I address two questions (i) whether EITI implementation experience is associated with improved control of corruption for all implementing countries taken together, and (ii) whether the effect of EITI implementation experience on the perceived level of corruption varies across implementing countries. Based on the sampled 51 implementing countries over the period 2003-2015, I find that across-the-board, EITI implementation experience is not associated with improved control of corruption. The findings show that the interaction term for EITI implementation experience with Sub-Saharan African countries is positively associated with improved control of corruption. Thus, the negative effect associated with EITI implementation experience is less for Sub-Saharan African countries. I address the second issue by investigating the economic value of extractive companies’ exploration payments information disclosed under the EITI implementation process. Using the United States Extractive Industries Transparency Initiative (USEITI), I examine the impact of disclosure of non-tax payments by extractive companies to the US government, as an illustration of the economic value of information disclosed as a result of the EITI. I address two research questions (i) whether investors react to the initial disclosure of the USEITI information and hence whether the information is of value to investors, and (ii) the value relevance of this information over the whole period for which this information has been available. The issue employs two separate but related methods to examine these questions. First, it employs a standard event study methodology, to test for trading volume and price reaction, around the event date of the first-time release of this information. Second, it employs the Collins, Pincus, and Xie, (1999) adaptation of the Ohlson (1995) model to examine the value relevance of USEITI information disclosure over the period 2013-2016. The results show that the USEITI disclosure evoked both trading volume and price reactions, thus suggesting that the disclosure of extractive payments had information content relevant to price setting. The price reaction, as evidenced in the cross-sectional regression, is associated with oil and gas firms, and the working capital and asset turnover of the sample extractive companies. The results also indicate that the continuing disclosure of the USEITI information was value relevant. Taken together, the findings from the thesis suggest that the EITI has been relatively effective in lessening the level of perceived corruption in the countries in dire need of reform and more importantly, the information released under the EITI implementation regime has economic value both at initial release and subsequent continued release. Thus, policymakers and managers of companies operating in countries rich in natural resources need to take note of the impact of EITI implementation.</p>