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Variables, Codes, Authors who mentioned the effect in previous studies, their measurements, expected signs and data sources of the equation (1) Variables Code Authors who mentioned the effect in previous studies Measurements Data Sources Ex- pectd sign Dependent variable Foreign Direct Investment FDI Net FDI inflows measured as the percentage of GDP (%) WDI, WB Independent Variables Institutional quality INSTQUA LITY Hyun, 2006; Fukumi & Nishijima, 2010; Shah, Ahmad, & Ahmed, 2015 A composite institutional index, captured by the five indicators -2.5 to 2.5 (-2.5: lowest quality; 2.5: highest quality) WGI, WB + Shadow economy SHADOW Nikopour, Habibullah, Schneider and Law (2010). The shadow economy as percentage of GDP (%) Medina & Schneider (2018) - Domestic investment DI Anwar and Nguyen, 2010; Lautier and Moreaub, 2012; Buchanan et.al, 2012 Ratio of Gross capital formation in GDP (%) WDI, WB +/ _ GDP growth GDPG Chowdhury and Mavrotas, 2006; Umoh, Jacob and Chuku, 2012 GDP growth rate (%) WDI, WB + Human resources LABORF ORCE Schneider & Frey, 1985; Moore, 1993; Wang and Swain, 1995; Brainard, 1997; Wei, 2010 the labor force participation rate (%) WDI, WB + Labor quality LABORQ UALITY Broadman, 1997; Coughlin, 2000 School enrollment, tertiary (% gross) UNESCO Institute for + 159 Statistics. Labor cost WAGE Schneider & Frey, 1985; Wheeler & Mody, 1992; Loree & Guisinger, 1995 Average wage monthly per worker USD Global Wage Report 2016/17, ILO _ Infrastructure TEL Wheeler and Mody, 1992; Loree and Guisinger, 1995; Asidu, 2002; Lumbila, 2005 Telephone lines/mobiles per population WDI, WB + Trading Openness OPEN Aizenman and Noy, 2006; Liargovas and Skandalis, 2012 Ratio of import & export in GDP (%) WDI, WB + Natural resources FUEL Asiedu, 2006; Aleksynska & Havrylchyk, 2013 Percentage of fuel exports on total exports WDI, WB + B. Variables, Codes, Authors who mentioned the effect in previous studies, their measurements, expected signs and data sources of the equation (2) Variables Code Authors who mentioned the effect in previous studies Measurements Data Sources Ex- pectd sign Dependent variable Institutional quality INSTQUAL ITY A composite institutional index, captured by the five indicators -2.5 to 2.5 (-2.5: lowest quality; 2.5: highest quality) WGI, WB Independent Variables Foreign Direct Investment FDI Larrain & Tavares, 2004; Dang, 2013; Long, Yang & Zhang, 2015 Net FDI inflows measured as the percentage of GDP (%) WDI, WB + Shadow economy SHADOW Johnson et al.,1998; Friedman, et al., 2000 The shadow economy as percentage of GDP Medina & Schneider (2018) - 160 (%) Democratizat ion DEMOC Adsera, Boix, & Bayne, 2003; Lederman, Loayza, & Soares, 2005; Fukumi & Nishijima, 2010 Democratic index, combined by Political Right Index and Civil Liberties Index (Scale 1-7, higher index indicates lower freedom) Freedom in the World, Freedom House - Economic Freedom ECO_FREE Herrera-Echeverri H, Haar J and Estevez- Bretonc H., 2014 Economic Freedom Index (0-100) 0: repressed 100: freest Index of Economic Freedom, The Heritage Foundatio n. + Education EDU La Porta, Lopea-de- Silanes, Shleifer, & Vishny, 1999; Glaeser, La Porta, Lopez-de-Silanes, & Shleifer, 2004; Alonso & Garcimartin, 2013 Average years of schooling (years) Institute for Statistics, UNESCO. + Trade openness OPEN Ades & Tella, 1999; Treisman, 2000; Kandil, 2009; Fukumi & Nishijima, 2010 Exports plus imports as a percentage of GDP (%) WDI + Development and income level GNIPERC La Porta, Lopea-de- Silanes, Shleifer, & Vishny, 1999; Chong & Zanforlin , 2000; Glaeser, La Porta, Lopez-de-Silanes, & Shleifer, 2004; Alonso & Garcimartin, 2013; La Porta, Lopea-de- Silanes, Shleifer, & Vishny, 1999 GNI per capita (USD) WDI + 161 C. Variables, Codes, Authors who mentioned the effect in previous studies, their measurements, expected signs and data sources of the equation (3) Variables Code Authors who mentioned the effect in previous studies Measurements Data Sources Ex- pect d sign Dependent variable The Shadow economy SHADOW The country level of shadow economy as a percentage of official GDP (%) Medina & Schneider (2018) Independent Variables Foreign Direct Investment FDI Nikopour, Habibullah, Schneider and Law (2010). Net FDI inflows measured as the percentage of GDP (%) WDI, WB - Institutional quality INSTQUA LITY Fugazza & Jacques, 2003; Torgler & Schneider, 2007, 2009; Dreher, Kotsogiannis, & McCorriston, 2009; Schneider, 2010 A composite institutional index, captured by the five indicators Scale -2.5 to 2.5 (-2.5: lowest quality; 2.5: highest quality) WGI, WB - Burden of government regulations GOVT_BU RDEN Friedman, Johnson, Kaufmann, & Zoido- Labton, 2000 Scale 1-7 [1 = extremely burdensome; 7 = not burdensome at all] GCI, World Economic Forum. - Tax burden TAX Johnson, Kaufmann, & Zoido-Lobaton, 1998; Schneider, 2003, 2007, 2010 Ratio of tax revenue in GNI WDI, WB + Globalization GLOBAL Goldberg and Pavcnik, 2003; Bacchetta et al., 2009; Melitz, 2003; Potrafke, 2014 KOF Globalization Index KOF Swiss Economic Institute +/- GDP growth GDPG Schneider & Bajada, GDP growth rate WDI, WB +/- 162 2003; Schneider & Enste, 2013; Vo & Pham, 2014 (%) Economic Freedom ECO_FRE E Zarra-Nezhad, Hasanvand, & Akbarzadeh, 2014 Economic Freedom Index (0-100) 0: repressed 100: freest Index of Economic Freedom, The Heritage Foundation + Corruption CORRUPT Johnson et al., 1997; Hindriks et al., 1999; Hibbs and Piculescu, 2005; Dreher & Schneider, 2010; Choi and Thum, 2005; and Dreher et al., 2008 Control of corruption index Scale: -2.5 (more corrupt) to 2.5 (less corrupt) WGI, WB +/- Unemployment U_RATE Dell‘Anno & Solomon, 2008 Unemployment, total (% of total labor force) (modeled ILO estimate) WDI, WB + Retirement RETIRE Zarra-Nezhad, Hasanvand, & Akbarzadeh, 2014 Population ages 65 and above (% of total) WDI, WB + Urbanization URBAN Safa, 1986; Elgin & Oyvat, 2013 Urban population (% of total) WDI, WB. + /- D. Variables, Codes, Authors who mentioned the effect in previous studies, their measurements, expected signs and data sources of the equation (4) Variables Code Authors who mentioned the effect in previous studies Measurements Data Sources Ex- pect d sign Dependent variable Income Inequality Income share held by lowest GINI INC_LOW EST20 0 (perfect equality) - 100 (perfect inequality) % WDI, WB WDI, WB 163 20% Income share held by highest 20% INC_HIGH EST20 % WDI, WB Independent Variables Shadow economy SHADOW The country level of shadow economy as a percentage of official GDP (%) Medina & Schneider (2018) - + - Employment EMPLOY_ SERVICES Rice and Lozada, 1980; Mocan, 1999 Employment in services (% of total employment) ILOSTAT database - Inflation CPI Rice and Lozada, 1980; Mocan, 1999 Inflation, consumer prices (annual %) IMF + Trade Openness OPEN Barro, 2000; Wood, 1997 Ratio of import & export in GDP (%) WDI, WB - Institutional quality INSTQUA LITY Chong and Gradstein, 2007; Carmignani, 2009 The component Institutions of Global Competitiveness Index (GCI). Scale from 1 (lowest quality) to 7 (highest quality). GCI, World Economic Forum - Economic freedom ECO_FRE EDOM Berggren, 1999, 2003; Scully, 2002; Ashby and Sobel, 2008; Carter, 2006 Economic freedom index. scale of 1 to 10, higher scores imply higher levels of economic freedom. Economic Freedom Report 2016, the Fraser Institute +/- Education EDU_HDR Knight and Sabot, 1983; Winegarden, 1979; O‘neill, 1995; Gregorio and Lee, 2002; Education index, scale 0 (lowest) – 1(highest) Human Developme nt Report, UNDP - 164 Corruption CORRUPT ION Gupta et al., 2002; Gyimah-Brempong, 2002; and Apergis, 2010 Control of corruption index Scale: -2.5 (more corrupt) to 2.5 (less corrupt) WGI, WB - Natural resources and land distributions LANDPER PERSON Deininger and Squire, 1998; Fum and Hodler, 2010 Arable land (hectares per person) WDI, WB +/- 165 E. THE RESULTS OF PEARSON’S CORRELATION ANALYSIS 0.0001 0.0000 0.1476 0.1380 0.0000 0.0000 0.0000 urban -0.2199* 0.5219* 0.0808 0.0827 0.6763* 0.2900* 0.3620* 0.0000 0.0048 0.0466 0.0027 0.0179 0.0006 0.3849 retire 0.5193* -0.1566* -0.1108* 0.1664* 0.1317* -0.1908* -0.0485 0.0000 0.0014 0.0001 0.0000 0.0000 0.0079 0.0549 u_rate 0.4751* -0.1774* -0.2146* -0.2830* 0.2458* 0.1476* -0.1069* 0.0008 0.0000 0.0000 0.1766 0.0000 0.1869 0.0000 corrupt -0.1853* 0.6626* 0.3918* -0.0754 0.2339* 0.0736 0.3868* 0.4334 0.0000 0.5934 0.0807 0.0000 0.0000 0.0000 global -0.0437 0.4853* -0.0298 -0.0973* 0.5936* 0.2770* 0.3689* 0.4837 0.0001 0.0047 0.0000 0.0000 0.5832 0.0000 tax -0.0391 0.2147* 0.1571* 0.3650* 0.4941* 0.0306 0.3989* 0.0000 0.0000 0.0203 0.5185 0.0011 0.2573 0.0000 govt_burden -0.3225* 0.4913* 0.1291* -0.0361 0.1811* 0.0632 0.2612* 0.3948 0.0000 0.2717 0.9086 0.0000 0.0000 0.0000 gniperc -0.0475 0.6088* 0.0613 0.0064 0.4886* 0.2359* 0.4436* 0.7000 0.0000 0.0000 0.1845 0.0000 0.0001 0.0000 edu 0.0215 0.5689* 0.3512* 0.0740 0.7363* 0.2102* 0.4864* 0.0000 0.0000 0.6351 0.0001 0.0000 0.0004 0.0000 eco_free 0.2708* 0.5013* 0.0265 -0.2168* 0.4690* 0.1968* 0.4210* 0.3191 0.0000 0.0008 0.0000 0.0000 0.0000 0.0000 democ 0.0556 -0.4452* -0.1850* 0.2933* -0.2623* -0.2262* -0.2290* 0.0634 0.0306 0.0375 0.0000 0.0000 0.6758 0.2606 fuel -0.1034* 0.1204* 0.1158* 0.2779* 0.3832* -0.0234 -0.0628 0.0000 0.4489 0.0000 0.0000 0.0805 0.1546 0.0740 gdpg -0.3286* 0.0423 0.2883* 0.3321* -0.0974* -0.0794 -0.0995* 0.3079 0.0000 0.0000 0.1056 0.0000 0.0000 0.0000 tel -0.0569 0.4438* 0.3062* 0.0902 0.4671* 0.2697* 0.3879* 0.5801 0.0000 0.0120 0.0002 0.0000 0.3442 open 0.0309 0.7070* 0.1396* 0.2084* 0.3421* 0.0528 1.0000 0.0600 0.0055 0.0004 0.4113 0.0000 wage 0.1048* 0.1540* -0.1974* -0.0459 0.2317* 1.0000 0.0740 0.0000 0.0015 0.0140 laborquality 0.0996* 0.3725* 0.1762* 0.1367* 1.0000 0.0020 0.0615 0.0001 labor -0.1711* 0.1042* 0.2132* 1.0000 0.0000 0.0000 di -0.4111* 0.3567* 1.0000 0.0000 instquality -0.2668* 1.0000 shadow 1.0000 shadow instqu~y di labor laborq~y wage open > urban, sig star(10) . pwcorr shadow instquality di labor laborquality wage open tel gdpg fuel democ eco_free edu gniperc govt_burden tax global corrupt u_rate retire 166 0.0000 0.0000 0.0000 0.0000 0.0701 0.0026 urban 0.4885* 0.2796* 0.6252* 0.3456* 0.1009* -0.1671* 1.0000 0.0013 0.0594 0.5055 0.0001 0.0042 retire -0.1783* -0.1050* 0.0372 -0.2199* 0.1587* 1.0000 0.0004 0.9064 0.4304 0.6858 u_rate -0.1955* -0.0066 0.0440 0.0226 1.0000 0.0000 0.0453 0.0000 corrupt 0.2720* 0.1115* 0.2433* 1.0000 0.0000 0.0043 global 0.5757* 0.1585* 1.0000 0.5487 tax 0.0335 1.0000 govt_burden 1.0000 govt_b~n tax global corrupt u_rate retire urban 0.0000 0.6712 0.0000 0.0000 0.0000 0.0000 0.0000 urban 0.3938* -0.0237 0.3706* -0.3258* 0.3702* 0.4767* 0.6881* 0.5146 0.6609 0.0377 0.0000 0.1198 0.0098 0.1802 retire 0.0364 -0.0245 0.1157* 0.2436* 0.0867 0.1434* 0.0747 0.1618 0.0000 0.0439 0.1553 0.0466 0.0023 0.9582 u_rate -0.0780 -0.2504* 0.1122* -0.0793 0.1108* 0.1693* -0.0029 0.0000 0.9029 0.7938 0.0000 0.0000 0.0000 0.0000 corrupt 0.3332* 0.0068 -0.0146 -0.4301* 0.2661* 0.3131* 0.2925* 0.0000 0.0040 0.4393 0.0000 0.0000 0.0000 0.0000 global 0.4121* -0.1595* 0.0432 -0.3824* 0.5901* 0.5183* 0.5865* 0.0000 0.3384 0.0000 0.9457 0.3168 0.0000 0.0007 tax 0.3283* -0.0534 0.2264* 0.0038 0.0559 0.4258* 0.1875* 0.0000 0.5701 0.6647 0.0001 0.0000 0.0000 0.0000 govt_burden 0.4126* -0.0317 -0.0242 -0.2159* 0.3579* 0.2988* 0.5904* 0.0000 0.5846 0.0000 0.0264 0.0000 0.0000 gniperc 0.5122* -0.0305 0.3313* -0.1235* 0.4318* 0.6016* 1.0000 0.0000 0.1639 0.0000 0.0000 0.0000 edu 0.6025* -0.0776 0.2961* -0.2948* 0.4653* 1.0000 0.0000 0.0005 0.6131 0.0000 eco_free 0.3124* -0.1935* -0.0282 -0.4646* 1.0000 0.0007 0.0001 0.2563 democ -0.1882* 0.2169* 0.0633 1.0000 0.0199 0.0015 fuel 0.1295* 0.1762* 1.0000 0.0054 gdpg -0.1546* 1.0000 tel 1.0000 tel gdpg fuel democ eco_free edu gniperc 167 F. STATA COMMAND (STATA 14) FOR MODEL 1 use "F:\PhDThesis\Shadow FDI InsQ.dta" xtset country year gen interaction= fdi* instquality 1. Descriptive Statistics sum fdi shadow instquality di labor laborquality wage open tel gdpg fuel democ eco_free edu gniperc govt_burden tax global corrupt u_rate retire urban moments2 fdi shadow instquality di labor laborquality wage open tel gdpg fuel democ eco_free edu gniperc govt_burden tax global corrupt u_rate retire urban sktest fdi shadow instquality di labor laborquality wage open tel gdpg fuel democ eco_free edu gniperc govt_burden tax global corrupt u_rate retire urban 2. Pearson’s correlation analysis pwcorr shadow instquality di labor laborquality wage open tel gdpg fuel democ eco_free edu gniperc govt_burden tax global corrupt u_rate retire urban 3. Unit-root test xtfisher fdi, pp xtfisher instquality, pp xtfisher shadow, pp xtfisher di, pp xtfisher gdpg, pp xtfisher labor, pp xtfisher laborquality, pp xtfisher wage, pp xtfisher d.wage, pp xtfisher fuel, pp xtfisher open, pp xtfisher d.open, pp xtfisher tel, pp xtfisher D.tel, pp xtfisher edu, pp 168 xtfisher d.edu, pp xtfisher gniperc, pp xtfisher d.gniperc, pp xtfisher democ, pp xtfisher govt_burden, pp xtfisher tax, pp xtfisher global, pp xtfisher corrupt, pp xtfisher u_rate, pp xtfisher retire, pp 4. Estimations 4.1. 3SLS **Specification 2 reg3 (fdi instquality shadow di gdpg labor laborquality d.wage fuel) (instquality fdi shadow d.edu d.open d.gniperc democ) (shadow fdi instquality interaction govt_burden tax global gdpg u_rate retire urban i.country i.year), ols est sto spe2ols estat hettest reg3 (fdi instquality shadow di gdpg labor laborquality d.wage fuel) (instquality fdi shadow d.edu d.open d.gniperc democ) (shadow fdi instquality interaction govt_burden tax global gdpg u_rate retire urban i.country i.year), 3sls est sto spe23sls estat hettest hausman spe2ols spe23sls **Specification 3 reg3 ( fdi instquality shadow di gdpg labor laborquality d.wage d.tel d.open fuel i.country i.year) ( instquality fdi shadow democ eco_free d.edu d.open d.gniperc) ( shadow fdi instquality interaction govt_burden tax global gdpg eco_free corrupt u_rate retire urban i.country i.year), ols est sto spe3ols 169 estat hettest test reg3 ( fdi instquality shadow di gdpg labor laborquality wage tel open fuel i.country i.year) ( instquality fdi shadow democ eco_free edu open gniperc) ( shadow fdi instquality interaction govt_burden tax global gdpg eco_free corrupt u_rate retire urban i.country i.year), 3sls est sto spe33sls estat hettest test hausman spe3ols spe33sls 4.2. Two Steps System GMM **FDI equation *Specification 1 xtdpdsys fdi instquality shadow, lags(1) twostep vce(robust) artests(2) estat abond estat sargan test *Specification 2 xtdpdsys fdi instquality shadow di gdpg labor laborquality d.wage fuel, lags(1) twostep vce(robust) artests(2) estat abond estat sargan test *Specification 3 xtdpdsys fdi instquality shadow di gdpg labor laborquality d.wage fuel d.open d.tel, lags(1) twostep vce(robust) artests(2) estat abond estat sargan test 170 **INSTITUTIONAL QUALITY equation *Specification 1 xtdpdsys instquality fdi shadow, lags(1) twostep vce(robust) artests(2) estat abond estat sargan test *Specification 2 xtdpdsys instquality fdi shadow d.edu d.open d.gniperc, lags(1) twostep vce(robust) artests(2) estat abond estat sargan test *Specification 3 xtdpdsys instquality fdi shadow d.edu d.open d.gniperc democ eco_free , lags(1) twostep vce(robust) artests(2) estat abond estat sargan test **SHADOW equation *Specification 1 xtdpdsys shadow fdi instquality, lags(1) twostep vce(robust) artests(2) estat abond estat sargan test *Specification 2 xtdpdsys shadow fdi instquality interaction govt_burden tax global gdpg u_rate retire urban, lags(1) twostep vce(robust) artests(2) estat abond estat sargan test mfx 171 *Specification 3 xtdpdsys shadow fdi instquality interaction govt_burden tax global gdpg u_rate retire urban eco_free corrupt, lags(1) twostep vce(robust) artests(2) estat abond estat sargan test mfx 172 H. STATA COMMAND (STATA 14) FOR MODEL 2 use "F:\PhDThesis\Shadowandinequality.dta" xtset country year 1. Summary statistics sum gini lowest20 highest20 shadow employ inflation open inst ecofree edu corrupt land moments2 lowest20 highest20 shadow employ inflation open inst ecofree edu corrupt land sktest lowest20 highest20 shadow employ inflation open inst ecofree edu corrupt land 2. Pearson’s correlation analysis pwcorr gini lowest20 highest20 shadow employ inflation open inst ecofree edu corrupt land 3. Unit-root test Xtfisher gini, pp xtfisher lowest20, pp xtfisher highest20, pp xtfisher shadow, pp xtfisher employ, pp xtfisher inflation, pp xtfisher open, pp xtfisher inst, pp xtfisher ecofree, pp xtfisher edu, pp xtfisher corrupt, pp xtfisher land, pp 4. Estimation 4.1. The estimated results testing the impact of shadow economy on Gini from Pooled Ordinary Least Squares, Fixed Effects and Random Effects 173 **Pooled Ordinary Least Squares reg gini shadow employ inflation open inst ecofree edu corrupt land est sto giniPOLS *Breusch and Pagan test for heteroskedasticity estat hettest *Wooldridge test for autocorrelation in panel data tsset xtserial gini shadow employ inflation open inst ecofree edu corrupt land **Fixed Effects xtreg gini shadow employ inflation open inst ecofree edu corrupt land, fe est sto giniFE *Modified Wald test for groupwise heteroskedasticity in fixed effect regression model xttest3 *Wooldridge test for autocorrelation in panel data tsset xtserial gini shadow employ inflation open inst ecofree edu corrupt land *Fixed-effects GLS regression (to solve heteroskedasticity) xtgls gini shadow employ inflation open inst ecofree edu corrupt land i.year, panels(h) **Random Effects xtreg gini shadow employ inflation open inst ecofree edu corrupt land, re est sto giniRE *Breusch and Pagan Lagrangian multiplier test xttest0 174 *Wooldridge test for autocorrelation in panel data tsset xtserial gini shadow employ inflation open inst ecofree edu corrupt land *Random-effects GLS regression (to solve heteroskedasticity) xtgls gini shadow employ inflation open inst ecofree edu corrupt land, panels(h) *Hausman Test hausman giniFE giniRE 4.2. The estimated results testing the impact of shadow economy on the income share held by lowest 20% from Pooled Ordinary Least Squares, Fixed Effects and Random Effects **Pooled Ordinary Least Squares reg lowest20 shadow employ inflation open inst ecofree edu corrupt land est sto lowest20POLS *Breusch-Pagan / Cook-Weisberg test for heteroskedasticity estat hettest *Wooldridge test for autocorrelation in panel data tsset xtserial lowest20 shadow employ inflation open inst ecofree edu corrupt land **Fixed Effects xtreg lowest20 shadow employ inflation open inst ecofree edu corrupt land, fe est sto lowest20FE *Modified Wald test for groupwise heteroskedasticity in fixed effect regression model xttest3 *Wooldridge test for autocorrelation in panel data tsset xtserial lowest20 shadow employ inflation open inst ecofree edu corrupt land 175 *Fixed-effects GLS regression (to solve heteroskedasticity and autocorrelation) xtgls lowest20 shadow employ inflation open inst ecofree edu corrupt land i.year, panels(h) **Random Effects xtreg lowest20 shadow employ inflation open inst ecofree edu corrupt land, re est sto lowest20RE *Breusch and Pagan Lagrangian multiplier test xttest0 *Wooldridge test for autocorrelation in panel data tsset xtserial lowest20 shadow employ inflation open inst ecofree edu corrupt land **Hausman Test hausman lowest20FE lowest20RE 4.3. The estimated results testing the impact of shadow economy on the income share held by highest 20% from Pooled Ordinary Least Squares, Fixed Effects and Random Effects **Pooled Ordinary Least Squares reg highest20 shadow employ inflation open inst ecofree edu corrupt land est sto highest20POLS *Breusch-Pagan / Cook-Weisberg test for heteroskedasticity estat hettest *Wooldridge test for autocorrelation in panel data tsset xtserial highest20 shadow employ inflation open inst ecofree edu corrupt land **Fixed Effects xtreg highest20 shadow employ inflation open inst ecofree edu corrupt land, fe est sto highest20FE 176 *Modified Wald test for groupwise heteroskedasticity in fixed effect regression model xttest3 *Wooldridge test for autocorrelation in panel data tsset xtserial highest20 shadow employ inflation open inst ecofree edu corrupt land *Fixed-effects GLS regression (to solve heteroskedasticity) xtgls highest20 shadow employ inflation open inst ecofree edu corrupt land, panels(h) **Random Effects xtreg highest20 shadow employ inflation open inst ecofree edu corrupt land, re est sto highest20RE *Breusch and Pagan Lagrangian multiplier test xttest0 *Wooldridge test for autocorrelation in panel data tsset xtserial highest20 shadow employ inflation open inst ecofree edu corrupt land **Hausman Test hausman highest20FE highest20RE 4.3. The estimated results testing the impact of shadow economy on gini, the income share held by lowest 20% and the income share held by highest 20% from 2 steps system GMM xtdpdsys gini shadow employ inflation open inst ecofree edu corrupt land, lags(1) twostep vce(robust) artests(2) estat abond estat sargan test xtdpdsys lowest20 shadow employ inflation open inst ecofree edu corrupt land, lags(1) twostep vce(robust) artests(2) estat abond estat sargan test 177 xtdpdsys highest20 shadow employ inflation open inst ecofree edu corrupt land, lags(1) twostep vce(robust) artests(2) estat abond estat sargan test