Shadow Economy and Political Stability: A Blessing or a Curse?

In this chapter, we will bring together independent theories and studies in order to investigate the relationship between the volume of the shadow economy and the degree of political stability in a given state, with the aim of shedding light on the role of the shadow economy in the events of the so-called Arab Spring. In the first section we present a survey of literature on the economies of the Arab Spring states, the determinants of political stability and the ways in which the shadow economy may affect political stability. In the second section we discuss our empirical strategy and present our dataset; in the third section we present empirical evidence showing the relationship between the shadow economy and political stability; and in the fourth section we offer a conclusion.