Corruption, the Shadow Economy and Innovation in Spanish Regions

Abstract

The aim of this paper is to analyze the effects of corruption and the shadow economy on innovation in the Spanish regions between 2000 and 2012. For this purpose, we use different proxies to approximate corruption and the shadow economy. We find evidence that corruption negatively influences innovation according to the results of the estimations. Regarding the effect of the shadow economy on innovation, the results also suggest that tax fraud, which is directly related to underground activities, leads to a decrease in regional innovation.

Keywords: innovation, corruption, shadow economy, Spanish regions

JEL Classification: R11, O32, O17, D73