Analysis of the Factors That Influence the Size Of Underground Economic Activities in Nigeria

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J. A. Nmesirionye


This study examined the critical factor that drive people underground. These factors which include poverty, unemployment rate, illiteracy rate, corruption index, real government consumptions, openness of the economy, economic liberalization as well as tax burden. The data for the study were generated from secondary sources and were analysed using multiple regression model. The variables in the model were subjected to unit root, co integration and error correction mechanism. The result showed that out of the eight factors examined only corruption index and economic liberalization were significant at 5% at the short run. The result further revealed that all other factors except tax burden had significant influence on the size of underground economy in the long run at 1%.  The study therefore recommended that all hands should be on deck to support the three point agenda corruption, security and economy   of the government   since the agenda contains issues bordering on curbing corruption, improving public accountability and transparency, diversification of the economy through agriculture which will enhance employment creation and poverty reduction.

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