The Long Shadow of Informality: Persistence, Asymmetry and the Social Development Trap

PALESTRANTE: 
Vasile Alecsandru STRAT
PhD, Professor - Bucharest University of Economic Studies, Department of Statistics and Econometrics / Dean Bucharest Business School

RESUMO:  This paper examines the dynamic relationship between the shadow economy and the social dimension of sustainable development for a balanced panel of 150 countries over 2000–2022. Social performance is proxied by a composite index of the social Sustainable Development Goals and the shadow economy by its estimated GDP share; both are treated as jointly endogenous within a Panel Vector Autoregression estimated by GMM with forward orthogonal deviations, complemented by Granger causality tests, impulse response functions and variance decompositions. Both processes are highly persistent, with autoregressive coefficients of 0.98–0.99 and a shock half-life of roughly four decades. A one-standard-deviation informality shock (≈3.5 pp of GDP) depresses the social SDG index by about 0.16 points, of which close to 90% persists after ten years. The reverse channel is absent in the pooled system but emerges by income group: informality erodes social outcomes in low- and middle-income countries, whereas social progress reduces informality in high-income ones, with Wald tests rejecting cross-group equality. The social development trap thus reflects the absence of a corrective mechanism rather than mutual reinforcement, calling for development-level-differentiated policy responses.

DATA: 17/08/2026
HORA: 16h40
SALA: 203

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