The effect of tourism on the shadow economy: The level of economic development is key

Using panel data covering the 2002-2015 period for 93 countries, this article provides substantial evidence that economic development levels drive the nonlinear relationship between tourism and the shadow economy. When the economic development level is below 1408.1 US dollars, tourism tends to increase the scale of the shadow economy. Then, the influence becomes insignificant when the economic development level is between 1408.1 US dollars and 6310.69 US dollars. With the development of the economy, tourism becomes beneficial to limit the scope of the shadow economy, and the magnitude of its marginal influence first increases, and then decreases with economic development. Our findings are relevant for policymakers in tailoring their policies toward limiting the scope of the shadow economy in the process of tourism development.