چکیده (انگلیسی):

This paper analyses how corruption, affect the formal economy and informal economy, using an Asian
country data. The literature strongly emphasizes the quantifiable importance of these factors to understand the
changes of informal economy. However, the limited number of researches uses cross-sectional country data with a
relatively few number of observations, and hardly any paper has investigated corruption and provides evidence using
within country data. We use 30 proxies that measure government indices and political behavior. Research result shows
increase in governance indices leads to a smaller informal economy. Furthermore, an increase in government stability
increases the size of the informal economy.