Shadow Economy and Political Participation in the United States

The empirical evidence presented in this study indicates a negative relationship between the size of the shadow economy and political participation. Based on panel data from 50 states for four election cycles between 2001 and 2008, regression results show that in the United States, both voter turnout rate and political contributions decline as the shadow economy grows. Specifically, when the size of the shadow economy increased across election cycles and between states by 1%, the voter turnout rate declined by 6.6% (P<0.01), and political contributions went down by 11.2% (P<0.01).