Technological Forecasting & Social Change 177 (2022) 121514

Contents lists available at ScienceDirect

Technological Forecasting & Social Change

journal homepage: www.elsevier.com/locate/techfore

Asymmetric effects of urbanization on shadow economy both in short-run

and long-run:New evidence from dynamic panel threshold model
Jingru Pang a, 1, Nan Li a, 1, Hailin Mu a, **, Xin Jin a, Ming Zhang b, 1
a
School of Energy and Power, Dalian University of Technology, Dalian, 116024, China
b
School of Economics and Management, China University of Mining and Technology, Xuzhou, 221116, China

A R T I C L E I N F O A B S T R A C T

Keywords: Urbanization and shadow economy are both common social problems in developing countries, yet rare studies
Urbanization have explored their potential relationships. Based on the provincial panel data in China, this paper estimates both
Shadow economy the short-run and long-run non-linear relationship between urbanization and shadow economy combining with
Short/long run
GMM (Generalized method of moments) and threshold analysis specifications, for symmetric analysis and
Asymmetry effect
Dynamic panel threshold model
asymmetric analysis, respectively. This paper also estimates if shadow economy is consistent with the EKC
(Environment Kuznets Curve) assumption, and including other explanatory variables such as energy consump­
tion, FDI (Foreign Direct Investment), tertiary industry and environmental regulation. Results show that ur­
banization does have an inversed U-shaped effect on shadow economy, so does economic growth, for both
symmetric and asymmetric analyses. Tertiary industry can redouble the scale of shadow economy, which is
consistent with all four analysis aspects. Other explanatory variables show slight differences in either symmetric/
asymmetric or short-run/ long-run results.

1. Introduction
Urbanization is becoming one of the most transformative trends in
the 21st century (UN, 2017). Over half of the population in the world
nowadays are living in the urban areas, and the proportion is predicted
to reach to 68% by 2050 (Kookana et al., 2020). Urbanization can lead to
economic prosperity, as more than 80 percent of global GDP is created in
urbans (WB, 2020). Nevertheless, it turns out that cities with faster
growing rates have no more financial resources than the cities with
average growing rates. According to McDonald et al. (2014), 68% of the
metropolises are in countries with middle or even low capital income,
such as China, Mexico, and Central Asia. Especially, it is the two poorest
regions that will have the largest increased urban population,
Sub-Saharan Africa and South Asia, where the proportion is expected to
double during the following twenty years (UN DESA, 2018).
Considerable theories and empirical analysis have proved that ur­
banization is integral to the development of economy (McGranahan,
2015) and environmental pollution/climate changes (Dong et al., 2021;
Luo et al., 2020; Meng et al., 2021). However, as an important compo­
nent of economic development, shadow economy and its consequences
have been inadvisably overlooked. It is the developing countries that
have the fastest urbanization developing rates, where the widespread
shadow economy is part of the reasons to prevent official economy from
moving forward. Based on Schneider et al. (2010), the percentage of
shadow economy in the developing countries can be as large as 67.7% or
even more (the size of year 2002 and 2003 in Bolivia). Still, rare research
has ever explored if it is a coincidence that both urbanization and
shadow economy break out in the developing countries. To fill the above
gaps, by applying the provincial panel date of China from 2008 to 2017
with GMM and threshold analysis specifications, this study estimates
both the short-run and long-run non-linear relationship between ur­
banization and shadow economy for both symmetric and asymmetric
aspects. Results show that urbanization does have an inversed U-shaped
relationship with the scale of shadow economy.
This research advantages the previous articles with the followings:
First, this is the pioneering study of the short-run and long-run non-
linear relationship between urbanization and shadow economy in both
symmetric and asymmetric aspects. Comparing with the current studies
that focus mainly on the economic development (Qiu et al., 2019), en­
ergy consumption (Sun and Huang, 2020; Wu et al., 2019) or environ­
mental pollution (Hao et al., 2020; Kookana et al., 2020; Muñoz et al.,
2020), this paper will bring new ideas for the following analysis. Most

** Corresponding author.
E-mail addresses: hailinmu@dlut.edu.cn (H. Mu), zhangmingdlut@163.com (M. Zhang).
1
Jingru Pang, Nan Li, and Ming Zhang contributed equally to this work, and should be considered as co-first authors.

https://doi.org/10.1016/j.techfore.2022.121514
Received 15 April 2021; Received in revised form 8 December 2021; Accepted 15 January 2022
Available online 19 January 2022
0040-1625/© 2022 Elsevier Inc. All rights reserved.
J. Pang et al.
importantly, the conclusion will help the Chinese government including
many developing countries who experiencing fast urbanization rates
when making policies about environmental protection as well as econ­
omy development. Even though this is not the first paper that studies the
inversed U-shaped relationship between shadow economy and urbani­
zation (Elgin and Oyvat, 2013; Rauch, 1993), but none of the previous
articles have analyzed the inversed U-shaped relationship in either long
term and short term or symmetric and asymmetric aspects. Second,
using new sub catalogs in the entropy weight method to define urban­
ization, which is more comprehensive and representative. Compared
with many research that only using urban population to represent ur­
banization (Wang et al., 2021; Wang et al., 2021; Wu et al., 2021), en­
tropy weight method covers more contents, which are all contributions
to the development of urbanization. The importance of comprehensive
definition of urbanization of the research is to reach more realizable
results, which will not only benefit the future research direction but also
the policy making.
The reminding article is organized with the followings. Section 2
addresses the literature review. Section 3 discusses the models and data
applied in this study. Section 4 provides the estimation procedures and
the empirical results. Section 5 lists the conclusions and regulation
recommendations.
2. Literature Review
Shadow economy, or informal economy, is also titled as shadow
sector or underground economy. Hart (2008) defines it as specific eco­
nomic activities outside the legal framework. Ihrig and Moe (2003)
describe it as an economic sector with goods production but without
following environmental regulations. The consequences of shadow
economy can be serious and widespread, especially when shadow ac­
tivities have become one of the most prevalent problems over the world
(Goel and Nelson, 2016). The challenges posed by shadow economy
include but not limit to society, economy, culture, and policy imple­
mentation. The worst part is that shadow activities are happening
under-explored therefore difficultly deriving useful information by
policymakers.
Recent articles of shadow economy mostly focus on the relationship
with pollution, environmental regulation, or other aspects (Chen et al.,
2018; Elgin and Öztunalı, 2014; Lazăr et al., 2019)). Articles about ur­
banization level are mostly concentrated on pollution (Luo et al., 2020;
Sheng et al., 2020) as well, but also on energy consumption (Liu et al.,
2021; Lv et al., 2020) or urban agriculture (Zhong et al., 2020), et al.
However, rare research has been working on the potential relationship
between urbanization level and scale of shadow economy, both are quite
prevalent especially in developing countries. Based on the articles from
Schneider et al. (2010), the mean size of shadow economy in 98
developing countries is 35.1% of the total GDP in 2007, while the one in
25 OECD countries is as small as 16.6% of the total GDP. After exam­
ining the twenty-two developing countries in Asia during 2002 to 2015,
Huynh (2020) proves that those countries are facing great challenges
coming from shadow economy. According to McGranahan (2015), the
rates in Asia have become the highest over the past half century even
though the global rates of urbanization have been declining.
Therefore, urbanization may be highly related to the size of shadow
economy, especially in developing countries, such as China. Daniels
(2004) lists some key informal activities in metropolis including snack
vending, pedicab drivers, small artisans, and home-based workers.
Especially some positions with unnecessarily poor salaries may still
generate significant volumes of underground productions, such as tele­
communications and computing services. Those activities normally will
be included as shadow sectors, as it is difficult for the government to
trace them for taxes. But that article does not provide empirical analysis
to prove the relationship between urbanization and shadow economy.
To fill the above study gaps, more comprehensive analysis is required to
further explore the detailed relationship between urbanization and
2
Technological Forecasting & Social Change 177 (2022) 121514
shadow economy.
Previous research has summarized some “push” factors from ur­
banization to the increase of shadow economy. The first one is the rural-
to-urban transfer of the labor force. Elgin and Oyvat (2013) claim that
urban informal sectors attract rural to urban population transfer due to
higher incomes and better public services. The second one is the
industrialization caused by the urbanization process, which often results
from a shift from agricultural economic structure to industrial economic
structure, coupled with poor infrastructure and illegal settlements
(Colenbrander, 2016). The third one is the technological improvements,
as Boyce (1993) claims that the technological improvements in rural
sector are “labor-saving”, which may lead to the decrease of rural
income.
There are also some “pull” factors that may lead to the decrease of
the scale of shadow economy due to the development of urbanization.
The first one is monopoly capital. According to Aglietta (1998), urban­
ization will contribute to the capital concentration and capital central­
ization, making traditional enterprises and small and medium-sized
enterprises hard to survive. And those enterprises are normally highly
linked to shadow economy.
To summarize, the relationship between urbanization and shadow
economy should exist, and the relationship should be non-linear. The
above hypothesis has been proved by previous articles. Rauch (1993) is
the first one to propose the inverted-U relationship between urbaniza­
tion and urban informal sector and successfully prove it. Based on the
database of 152 countries over 9 years from 1999 to 2007, Elgin and
Oyvat (2013) investigate the empirical relationship and prove the
inverted-U effect from the level of urbanization on the scale of shadow
economy. Xu et al., (2018) apply annual panel data of 131 countries and
regions based on 1999 to 2007 and prove the inverted-U relationship
between urbanization and informal sector, too.
3. Models and Data
3.1. Short-run dynamic panel model
First, the concept speed pf adjustment will be introduced, as it ap­
plies in the short-run dynamic panel model. For econometric specifica­
tion such as shadow economy, the adjustment of current situation
toward target normally takes a period, therefore called the dynamic
process.
( )
Δyi,t = γ y∗i,t − yi,t− 1 + υi,t (1)
Where Δyi,t is the first difference of yi,t. yi,t and y*i,t represent the actual
value and the observed value of the dependent variable of province i,
year t, respectively. γ is the speed of adjustment, measuring how fast the
percentage of shadow economy can be changed toward specific targets.
The higher the value of γ, the faster the speed of adjustment. υi,t is the
one way error component that will be explained later.
The original dynamic panel model with panel data is given by:
yi,t = ρyi,t− 1 + β′ ⋅Xi,t + υi,t ; i = 1, 2, ⋯, N; t = 1, 2, ⋯, T (2)
Where yi,t-1 represents the dependent variable of province i, year t-1. ρ is
the coefficient of yi,t-1. Xi,t represents all the independent variables of
province i, year t with β as the coefficients. υi,t is the one way error
component consisting of the individually provincial fixed effects:
υi,t = αi + εi,t (3)
Where αi is the individual provincial fixed effect that varies only across
provinces instead of over time. εi,t is the white noise to represent the
error term with a zero mathematical expectation and a constant
variance.
Based on Equ (1) to Equ (3), the speed of adjustment can be calcu­
lated as:
J. Pang et al. Technological Forecasting & Social Change 177 (2022) 121514

Table 1
Descriptive statistics of the variables applied in this research
Variables Definition Units Obs. Min. Max. Mean Stv.

se the percentage of shadow economy in total GDP % 300 0.07 0.25 0.13 0.03
urban urbanization level - 300 0.03 11.93 1.35 2.27
urban_s the square of urbanization level - 300 19.97 19.97 19.97 0.00
GDPgr the actual growth rate of GDP % 300 -0.02 0.56 0.13 0.09
GDPgr_s the square of the actual growth rate of GDP %^2 300 0.05 0.05 0.05 0.00
ev the energy consumption - 300 0.01 0.24 0.10 0.03
lnFDI log of the Foreign Direct Investment - 300 -2.38 2.77 0.92 1.06
TIgr the actual growth rate of the actual tertiary industry % 300 0.08 3.80 1.28 0.87
er environmental regulation % 300 0.00 0.04 0.01 0.01

γ =1− ρ (4) 3.2. Long-run panel model

While the estimation of ρ is biased downward as the regression is The adjustment mechanisms of the dependent variables may be
associated with unobserved fixed effects: αi (Nickell, 1981). The speed of complex, including not only homogeneous/heterogeneous rates (sym­
adjustment, γ, will then be biased upward. metry/asymmetry in short run) but also homogeneous/heterogeneous
The assumption under Eq. (1) is that shadow economy undertakes targets (symmetry/asymmetry in the long-run) (Dang et al., 2012). To
adjustments based on various of reasons in a symmetric fashion, which entertain some the intermediate scenarios in a more flexible manner,
will no longer be valid once the shadow economy changes infrequently this paper will apply both symmetric long-term target relationships and
at different rates. Fischer et al. (1989) firstly describe this transform asymmetrical short-term adjustment rates.
point as the “restructuring point”. To further capture this behavior, this The original short-run dynamic panel model, Equ. 2, will be adjusted
paper develops the dynamic threshold model with the regime-switching, as follows for long-term relationship estimation:
as follows:
yi,t = β′ ⋅Xi,t + υi,t ; i = 1, 2, ⋯, N; t = 1, 2, ⋯, T (8)
( ) ( )
(5)
′ ′
yi,t = ρ1 yi,t− 1 + β1 ⋅Xi,t 1{ri,t ≤c} + ρ2 yi,t− 1 + β2 ⋅Xi,t 1{ri,t >c} + αi + εi,t
The original short-run dynamic threshold model with the regime-
Where 1{•}represents the indicator function that takes the numerical switching will be developed to capture the long-run relationship esti­
value 1 once the assumption in the brace is true or 0 otherwise. The mation as follows:
transition variable of regime-switching is represented by ri,t, and the ( ′ ) ( ′ )
yi,t = β1 ⋅Xi,t 1{ri,t ≤c} + β2 ⋅Xi,t 1{ri,t >c} + αi + εi,t (9)
threshold parameter is represented by c. Therefore, the basic idea of this
dynamic threshold model is: after estimating the transition variable, the
The first-difference transformation version of Equ. 9 is:
restructuring point, c, will be determined to separate the equation into
{ ′ } { ′ }
two parts with different adjustment rates, ρ and β. Δy(i,t) = β1 ⋅ΔX1i,t + β2 ⋅ΔX2i,t + Δεi,t (10)
This paper then applies the Generalized Method of Moment (GMM)
with instrumental variables for the following estimation. Especially The difference between the short-run and the long-run is the lagged
when the regressors are correlated with the individual provincial fixed explained variable in the short-run model, which can show the short-run
effects, αi. Firstly the Eq. 5 is rewritten with first-difference dynamic process. This kind of distinguish is also applied in Dang et al.
transformation: (2012), who use dynamic panel threshold models to study the asym­
{ } { } metric capital structure adjustments. The reason why the lagged
(6)
′ ′
Δyi,t = ρ1 Δy1i,t− 1 + β1 ⋅ΔX1i,t + ρ2 Δy2i,t− 1 + β2 ⋅ΔX2i,t + Δεi,t
explained variable can show the short-run process is as the followings:
first, shadow economy is like many other variables, such as pollution,
Where Δy1i,t-1=Δyi,t-1•1{ri,t≤c}, Δy2i,t-1=Δyi,t-1•1{ri,t>c}; ΔX1i,t-1=ΔXi,t-
has time lag characteristic, which means that the current scale of
1•1{ri,t≤c}, ΔX2i,t-1=ΔXi,t-1•1{ri,t>c}. Also, the individual provincial fixed
shadow economy normally will be affected by the previous situation,
effect, αi, has been successfully removed.
and cannot be changed dramatically within short period. This kind of
If there is no heteroscedasticity limitation, the GMM estimators can
character can also show the dynamic process. Therefore, in the short
be calculated within one step. However, if εi,t is heteroscedastic, the
run, the current scale of shadow economy will be affected by the pre­
efficient two-step GMM estimation will be applied as in this paper. As Q
vious situations and cannot be ignored. In the long run, however, the
(c) is the generalized distance measure1, the threshold parameter, c in
effects from the previous situation can then be ignored, especially one
this study, can be estimated by:
year lagged effect.
c = argminc∈C Q(c)
̂ (7)

According to Dang et al. (2012), the threshold model with a
regime-switching has advantages when comes to the examination of
asymmetries in dynamic adjustments. First, the threshold parameter is
estimated with a model instead of being chosen arbitrarily, such as the
quantile regression. Second, dynamic threshold model makes it possible
to switch regime over-time through the entire sample. Third, the first
different transformation can eliminate numbers of general regressor
problems.
2
For detailed explanation, please see Dang et al. (2012).
3.3. Data
The data in this article are resourced from China Statistical Year­
book, China Energy Statistics Yearbook and Statistical Yearbook for each
province. The descriptive statistics of each variable in this paper are
listed in Table 1 as follows:
3.2.1. Urbanization
The entropy weight theory will be used in this paper to calculate the
comprehensive urbanization. The basic theory is that: among various of
evaluated objects of the same indicator, the higher the differences
among the objects are, the more significant the indicator will be (Li
et al., 2016; Wu et al., 2019; Zhao and Tang, 2018). Plenty of research
that focus on urbanization development have drawn a consistent

3
J. Pang et al. Technological Forecasting & Social Change 177 (2022) 121514

Total Urbanization

Population and Consumption

Living Condition Industrialization Education
Employment Ability

Urban population Night light data per Proportion of second Fiscal expenditure on
GDP per capital
density capital industry education
Fiscal educational
The value-added of
Urban population Total GDP Night light data expenditure
second industry
/Urban area /Total population /Total population /Total educational
/Total GDP
expenditure

The proportion of Urban-rural
urban population consumption ratio
Rural consumption
Urban population ration
/Total population /Urban consumption
ratio
Income ratio of
Urban green area per Ratio of university
industrial enterprises
capital degree or above
above designated size
Profit from main Population of
Urban green area operation university degree or
/Total population /Income from main above per 100,000
operation people

Urban sewage
Urban labor force Proportion of tertiary Ratio of industrial Collection of public
treatment per capital
participation rate industry R&D expenditure libraries per capital
per day
Urban total employed The value-added of Urban sewage Expenditure of R&D Total collection of
/Urban working age tertiary industry treatment per day /cost from main public libraries
population /Total GDP /Total population operation /Total population

Number of industrial
Urban self- Urban per capital
Total public transport enterprises above Number of universities
employment rate disposable income
designated size
Urban private Number of industrial
individual employed Urban per capital
Total public transport enterprises above Number of universities
disposable income
/Urban total employed designated size

Fig. 1. Construction of the total urbanization level. Note: each of the five indicators (population and employment, consumption ability, living condition, indus­
trialization, and education) has four individual objects, with their detailed calculation processes listed below for each object.

conclusion that comprehensive urbanization measurement cannot be ∑n ∑T ( )

completed by only one single indicator (Zhao and Chai, 2015). Based on ρ lnρq,it
ϵq = − i=1 t=1 q,it
(12)
Shen et al. (2015), for each indicator, the entropy method can evaluate ln(n + T)
the performance of both speed and quality, which can reflect the The weight of the entropy can be calculated by:
development and coordination of urbanization. How to measure the ( )
speed and quality quantitative during the calculation of urbanization 1 − ϵq
ω q = ∑Q ( ) (13)
level instead of only phenomenal descriptions will then be a problem, q=1 1 − ϵq
and the entropy method can make that a reality by representing the
speed and quality by associated indicators (Zhao and Chai, 2015). The comprehensive urbanization of the pth indicator can be calcu­
Compared with the subjective weighting method, the entropy weight lated by:
theory can not only overcome the disconnection and randomness ∑Q
urbanp = ωq ρpq (14)
problems, but also the overlapping information coming from multiple q=1

indicators (Yu et al., 2015). Also, the as the weights of each indicator can The total urbanization can be calculated by:
be weighted properly, the evaluation can then be processed more ∑P
effectively (Shemshadi et al., 2011). The detailed calculation processes urbanTotal = ωp ρp , p = 1, 2, ⋯, P; (15)
are listed as follows:
p=1

The proportion of each value of object q for each indicator p is Where urbanTotal is the total urbanization level, ωp is the weight of in­
calculated by: dicator p and ρp is proportion of each indicator p.
urbanq,it This study names five indicators with four objects respectively for the
ρq,it = ∑n ∑T (11) total urbanization calculation. As shown in Fig 1, the five indicators are
t=1 urbanq,it
population and employment, consumption ability, living condition,
i=1

i = 1, 2, ⋯, n; t = 1, 2, ⋯, T; q = 1, 2, ⋯, Q. industrialization, and education.

The scores and ranks of each indicator and the total urbanization
Where urbanq,it is the original value of each object q for province i year t. levels are listed in Table 2. Based on the scores under column Total
Then, the entropy of each object q can be calculated by: Urbanization, the urbanization levels of each province vary from each

4
J. Pang et al. Technological Forecasting & Social Change 177 (2022) 121514

Table 2
Scores and Ranks of indicators and total urbanization levels in China from 2008 to 2017.
Provinces Population and Employment Consumption Ability Living Condition Industrialization Education Total Urbanization
Scores Ranks Scores Ranks Scores Ranks Scores Ranks Scores Ranks Scores Ranks

shanghai 0.32 10 0.50 5 45.74 1 0.78 13 21.84 18 28.56 1

tianjin 0.24 27 0.51 4 20.41 2 0.43 17 17.40 23 13.36 2
beijing 0.35 4 0.53 2 17.38 3 0.30 23 27.58 14 12.35 3
jiangsu 0.39 1 0.52 3 10.61 4 3.65 1 47.94 1 11.03 4
guangdong 0.35 5 0.37 21 7.76 5 3.22 2 42.18 2 8.79 5
shandong 0.26 23 0.43 12 7.43 7 3.04 3 42.01 3 8.53 6
zhejiang 0.37 2 0.54 1 7.68 6 2.97 4 31.84 10 7.87 7
hebei 0.24 28 0.39 17 3.98 8 1.05 10 35.05 8 5.37 8
liaoning 0.30 15 0.42 13 3.51 9 1.16 8 34.74 9 5.10 9
henan 0.25 26 0.36 22 3.04 11 1.62 5 36.29 6 5.09 10
anhui 0.30 14 0.37 20 2.62 13 1.22 7 35.13 7 4.63 11
fujian 0.33 7 0.49 6 3.25 10 1.24 6 26.60 15 4.35 12
hubei 0.31 13 0.40 16 1.65 16 1.05 11 37.80 4 4.22 13
hunan 0.29 19 0.39 19 1.13 20 1.07 9 36.96 5 3.86 14
shanxi 0.24 29 0.44 10 2.83 12 0.32 21 23.34 17 3.56 15
shaanxi 0.26 24 0.34 26 1.76 15 0.39 19 27.97 12 3.31 16
sichuan 0.28 20 0.44 8 0.92 24 1.04 12 30.82 11 3.25 17
jiangxi 0.29 18 0.45 7 1.03 22 0.67 14 27.93 13 2.98 18
heilongjiang 0.26 25 0.44 9 1.03 21 0.32 22 24.54 16 2.61 19
chongqing 0.37 3 0.31 29 1.54 17 0.46 15 18.21 21 2.45 20
guangxi 0.28 22 0.34 27 0.99 23 0.43 18 21.73 19 2.40 21
jilin 0.32 11 0.43 11 1.31 19 0.44 16 17.90 22 2.29 22
yunnan 0.30 17 0.35 24 0.78 26 0.29 25 20.44 20 2.14 23
guizhou 0.23 30 0.33 28 0.78 25 0.29 24 16.55 24 1.84 24
hainan 0.33 6 0.41 14 2.15 14 0.05 30 5.59 28 1.71 25
neimenggu 0.32 8 0.39 18 0.41 28 0.35 20 14.83 25 1.50 26
gansu 0.28 21 0.31 30 0.39 29 0.16 27 13.38 26 1.32 27
xinjiang 0.32 9 0.35 25 0.41 27 0.19 26 12.79 27 1.30 28
ningxia 0.31 12 0.36 23 1.31 18 0.10 28 5.55 29 1.23 29
qinghai 0.30 16 0.41 15 0.11 30 0.06 29 3.47 30 0.36 30

Fig. 2. Night light distribution in 2017 and the urbanization level rank of China.

5
J. Pang et al.
Fig. 3. The scale of provincial shadow economy from 2008 to 2017 of China.
other, especially the top one Shanghai. The top 9 are provinces that all
come from the east part of China. From the 10th to the 20th, provinces
mostly come from the middle part of China, while provinces from the
21st to the last mostly comes from the west part. This result is highly
consistent with the actual economic situation of China. The detailed
proportions for each indicator are 1.26% (Population and Employment),
1.56% (Consumption Ability), 58.18% (Living Condition), 31.27% (Indus­
trialization), and 7.73% (Education). Due to the above weights, the rank
of the urbanization level for each province is highly related to living
condition indicator. The weight of industrialization indicator is lying
second. The night light data object itself under the living condition in­
dicator has been used by many articles to study urbanization level (Ch
et al., 2020; Ma et al., 2012; Stokes and Seto, 2019; Wang et al., 2020; Yi
et al., 2016), which can explain the highest weight of the living condi­
tion indicator. To make it clearer, Fig 2 lists the urbanization rank for
each province and the nigh light distribution of China in 2017, which are
highly consistent with each other.
3.2.2. Shadow Economy
As the other important variables in this article that is shadow
economy, the measurement can be exceedingly difficult given its clan­
destine characteristic. This article will apply the prevalent measurement
method called the Multiple Indicators Multiple Causes (MIMIC) method
(Frey and Weck-Hanneman, 1984). The calculation process and data
resource are consistent with the ones of Pang et al. (2020) and Pang
et al. (2021), which is also shown in Appendix A. The calculated scale of
shadow economy on GDP are shown in Fig. 3.
To sum up, the size of shadow economy for each province lies be­
tween 8% to 25% from 2008 to 2017. Anhui is lying first with the
smallest size while Heilongjiang is lying last with the largest size. the
differences within each province from years to years are relatively small,
except for provinces including Qinghai, Hebei, Guangdong, Beijing, and
Heilongjiang. Based on the above results, the size of shadow economy in
China is hard to be ignored and deserves more public attentions.
6
Technological Forecasting & Social Change 177 (2022) 121514
3.2.3. Other Variables
Economic Development: As one of the component parts of the total
GDP, the size of shadow economy is inextricably linked to the economic
development and progress. Therefore, the actual GDP growth rate will
be applied to be one of the explanatory variables. The calculation pro­
cess is using the difference between the current actual GDP and the
actual GDP of the previous period to divide the actual GDP of the pre­
vious period. The squared actual GDP growth rate will also be applied in
this article to verify the ECK assumption.
Energy Consumption: Plenty of articles have been proved that en­
ergy consumption is highly related to the scale of shadow economy. this
paper employs the entropy weight method to calculate the value. The
indicators are the consumptions of coal, gasoline, diesel, fuel oil, natural
gas, and electricity.
Foreign Direct Investment: Foreign direct investment can also
easily lead to shadow economy. After all, the higher the level of ur­
banization is, the more foreign investment tends to be. However, the
influence from FDI can also be ambiguous. Based on Elgin and Oyvat
(2013), international trades may not be helpful when comes to gov­
ernment supervision for shadow production. In this paper, the logged
value of FDI is applied.
The Tertiary Industry: The development of urbanization stands for
the development of tertiary industry. The transformation from indus­
trialization to tourist city is the general process of urbanization. Besides,
tertiary industry is highly related to shadow economy, too. For example,
tourism is prone to irregular fees and often uses cash, giving shadow
economy a run for its money. Even consumers tend to use cash to avoid
taxes. In this study, the actual proportion of the tertiary industry on GDP
is employed.
Environmental Regulation: The impact of environmental regula­
tion on shadow economy is self-evident and has been proved by plenty
literatures (Baksi and Bose, 2010; Chen et al., 2018; Mazhar and Elgin,
2013). This paper uses the provincial proportion of the total investments
in environmental pollution management on GDP to respect
J. Pang et al. Technological Forecasting & Social Change 177 (2022) 121514

Table 3
Short-Run Dynamic panel-data estimation, two-step system GMM
Dependent Variables: se
Model 1 Model 2 Model 3 Model 4 Model 5 Model 6

se(-1) 0.7517*** 0.6551*** 0.6563*** 0.3050* 0.5916*** 0.4197**

(0.000) (0.000) (0.000) (0.064) (0.000) (0.028)
urban 0.0042* 0.0083* 0.0079 0.0498* 0.0143** 0.0112*
(0.087) (0.096) (0.110) (0.067) (0.033) (0.059)
urban_s -0.0005* -0.0008* -0.0008* -0.0033* -0.0011** -0.0009**
(0.072) (0.059) (0.076) (0.066) (0.022) (0.024)
GDPgr 3.0025*** 3.1360*** 2.1715 0.7310 0.7549
(0.001) (0.000) (0.304) (0.454) (0.614)
GDPgr_s -14.6179*** -15.2599*** -14.4819 -8.3000 -13.5855
(0.001) (0.001) (0.191) (0.296) (0.247)
ev 0.0011 0.0231 0.0029 0.0005
(0.789) (0.293) (0.420) (0.920)
lnFDI -0.0300* -0.0089** -0.0059
(0.041) (0.017) (0.232)
Tigr 0.9679** 0.2797
(0.014) (0.355)
er -0.2292
(0.725)
cons 0.0343*** -0.0972** -1.0495** 0.0250 0.0329 0.0945**
(0.000) (0.046) (0.031) (0.817) (0.391) (0.009)
speed of adjustment γ 0.2483 0.2990 0.3437 0.6950 0.3424 0.5803

AR(1) -2.28 -2.00 -1.99 -1.31 -2.48 -1.89

(0.023) (0.045) (0.047) (0.189) (0.013) (0.059)
AR(2) 0.68 -1.01 -1.08 -0.23 -1.07 1.13
(0.496) (0.314) (0.281) (0.821) (0.283) (0.256)
Hansen 0.38 2.57 2.37 0.10 0.76 0.41
(0.943) (0.276) (0.124) (0.748) (0.685) (0.814)

Notes: *, **, *** represent statistically significant at 10%, 5%, and 1% levels, respectively. The z-values are in parentheses. The GMM estimators are obtained by Stata
module xtabond2 (Roodman, 2009), which is a non-commercial and downloadable program module on Statistical Software Components (SSC).

Table 4
Long-Run panel-data estimation, two-step system GMM
Dependent Variables: se
Model 1 Model 2 Model 3 Model 4 Model 5 Model 6

urban 0.0043 0.0022 0.0016 0.0118* 0.0127** 0.0139**

(0.525) (0.697) (0.690) (0.063) (0.027) (0.019)
urban^2 -0.0005 -0.0005 -0.0047 -0.0011** -0.0011*** -0.0013***
(0.402) (0.340) (0.176) (0.015) (0.008) (0.005)
GDPgr 2.2323* 2.1049** 2.3877** 1.6615 1.9876**
(0.075) (0.023) (0.011) (0.205) (0.011)
GDPgr^2 -26.7536*** -25.9637*** -27.9305*** -23.3874** -24.0062***
(0.007) (0.001) (0.000) (0.035) (0.003)
ev -0.0085 -0.0030 -0.0023 -0.0036
(0.319) (0.653) (0.671) (0.599)
lnFDI -0.0067** -0.0075** -0.0083***
(0.034) (0.013) (0.004)
TIgr 0.4636 -0.2371
(0.369) (0.660)
er -0.8256
(0.192)
cons 0.1364*** 0.1394*** 0.1567*** 0.1453*** 0.1302** 0.1887***
(0.000) (0.000) (0.000) (0.000) (0.027) (0.001)

AR(1) -1.68 -1.44 -1.72 -1.86 -2.24 -2.86

(0.093) (0.151) (0.086) (0.063) (0.025) (0.004)
AR(2) -0.65 1.04 1.11 1.14 1.42 0.88
(0.516) (0.298) (0.265) (0.254) (0.155) (0.381)
Hansen 2.24 2.70 1.71 1.87) 2.03 1.29)
(0.135) (0.440) (0.425) (0.601) (0.363) (0.525)

Notes: *, **, *** represent statistically significant at 10%, 5%, and 1% levels, respectively. The z-values are in parentheses. The GMM estimators are obtained by Stata
module xtabond2 (Roodman, 2009), which is a non-commercial and downloadable program module on Statistical Software Components (SSC).

environmental regulation. 4. Estimation Results

4.1. GMM Estimation-symmetric effects analysis

The Generalized Method of Moments (GMM) (Hasen, 1982) will be

applied for the analysis of the non-threshold but symmetric effects on

7
 J. Pang et al.
Table 5
Short-Run Dynamic Panel Threshold Models
Dependent variables: se Model 1 Model 2 Model 3 Model 4 Model 5 Model 6
lower upper lower upper lower upper lower upper lower upper lower upper

se(-1) -0.0753** 0.4258*** -0.9177*** 0.3650*** -0.4944*** 0.5189*** -1.0764*** 0.4283*** -0.3725 0.3665*** -0.6803*** 0.4725***
(0.042) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.128) (0.004) (0.005) (0.000)
urban 0.2037** 0.0657 6.6268*** 0.0618*** 4.2852*** 0.2107*** 2.5693** 0.0063*** 2.4153 0.7340 2.6516** 0.0880**
(0.025) (0.119) (0.002) (0.001) (0.000) (0.002) (0.013) (0.004) (0.117) (0.269) (0.032) (0.040)
urban^2 -0.1502** -0.0035** -6.2223*** -0.0033*** -3.7484*** -0.0093*** -0.9815 -0.0022 -2.4093 -0.0348 -1.8822** -0.0057**
(0.024) (0.027) (0.006) (0.006) (0.003) (0.003) (0.263) (0.260) (0.152) (0.157) (0.010) (0.010)
GDPgr 1.2279** 0.0673* 1.1343*** 0.0434* 0.4257 1.4837 1.2349* 0.2424 0.1244 0.1260
(0.023) (0.056) (0.002) (0.074) (0.456) (0.249) (0.073) (0.168) (0.879) (0.999)
GDPgr^2 -4.1624** -0.7990 -4.4329*** -1.3888 -0.4309 -5.4615 -4.4673* -1.8065 -2.1056 -1.7727
(0.047) (0.180) (0.003) (0.285) (0.859) (0.267) (0.097) (0.404) (0.616) (0.959)
ev -0.0440 -0.0269 0.0655** -0.0781*** 0.0475 -0.0158 0.1268* 0.1259
(0.102) (0.616) (0.040) (0.002) (0.185) (0.280) (0.050) (0.994)
lnFDI 0.0051 -0.0460*** -0.0170* -0.1026*** -0.0218** -0.0460
8

(0.774) (0.000) (0.094) (0.001) (0.021) (0.145)

TIgr -0.3647 0.1101* 0.2179 0.4385
(0.150) (0.079) (0.258) (0.265)
er -2.8158*** 0.7399***
(0.001) (0.001)
cons 0.1200 0.9907** 0.6571* 0.8060*** 0.1349 -2.7191***
(0.910) (0.012) (0.051) (0.000) (0.683) (0.001)
speed of adjustment γ 1.075 0.574 1.918 0.635 1.494 0.481 2.076 0.572 1.373 0.634 1.680 0.527
r 1.0816*** 0.8776*** 0.8776*** 1.0816* 0.8776*** 2.0274***
(0.000) (0.000) (0.000) (0.067) (0.000) (0.000)
% of lower regime 75.96% 66.89% 66.89% 75.96% 66.89% 77.83%

Technological Forecasting & Social Change 177 (2022) 121514

95% conf. interval of r [0.8757, 1.2875] [0.7983, 0.9569] [0.7170, 1.0382] [0.0740, 2.2372] [0.5490, 1.2061] [1.2582, 2.7967]
# of moment conditions 116 204 256 316 344 396
linearity test (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)

Notes: *, **, *** represent statistically significant at 10%, 5%, and 1% levels, respectively. The z-values are in parentheses. The dynamic panel threshold estimators are obtained using Stata module xthenreg (Seo et al.,
2019), which is a non-commercial and downloadable program module on Statistical Software Components (SSC). Please note that the module xthenreg returns the coefficients and z-values of the lower regime and the
difference (between the lower regime and the upper regime). The coefficients of upper regime are calculated, and the z-values are the z-values of the difference.
 J. Pang et al.
Table 6
Long-Run Panel Threshold Models
Dependent variables: se Model 1 Model 2 Model 3 Model 4 Model 5 Model 6
Lower Upper Lower Upper Lower Upper Lower Upper Lower Upper Lower Upper

urban 1.6966*** 0.0711*** 0.4197** 0.1451 2.2934** -0.0599** 4.2239*** 0.2999*** 4.4643*** 0.0136*** 3.9210** 0.1260**
(0.000) (0.000) (0.025) (0.132) (0.014) (0.010) (0.001) (0.0020) (0.002) (0.002) (0.019) (0.015)
urban^2 -2.1165*** -0.0044*** -0.2941** -0.0068** -0.8798 0.0025 -2.3528** -0.0160** -2.9211** -0.0030** -4.0323** -0.0075**
(0.000) (0.000) (0.017) (0.020) (0.250) (0.248) (0.029) (0.0300) (0.019) (0.019) (0.034) (0.034)
GDPgr 0.1272*** 0.2859 0.9185*** 0.3394*** 0.4432** 0.0987 0.0299 0.1170 -0.8924*** 0.3900**
(0.003) (0.100) (0.000) (0.003) (0.021) (0.2750) (0.896) (0.786) (0.005) (0.019)
GDPgr^2 -0.1516 -2.2738*** -1.5288*** -2.7727*** -0.9518** -0.3351 -0.1129 -0.3151 2.2909*** -2.1256***
(0.123) (0.000) (0.000) (0.008) (0.013) (0.3490) (0.807) (0.746) (0.003) (0.001)
ev -0.0523** 0.0157*** -0.0714*** 0.0093* -0.0711** -0.0104 0.0144 0.1213**
(0.044) (0.002) (0.004) (0.0820) (0.032) (0.258) (0.532) (0.031)
lnFDI -0.0057 -0.0551*** 0.0241*** -0.0511*** 0.0057 -0.0764***
(0.153) (0.000) (0.000) (0.000) (0.279) (0.000)
9

TIgr 0.3446*** -0.0446*** 0.7215*** 0.0491***

(0.002) (0.000) (0.000) (0.000)
er -0.4088 0.3627
(0.351) (0.464)
cons -0.4745*** (0.6811) *** 1.2056*** 1.6973*** 1.8037*** 0.3916
(0.000) (0.000) (0.000) (0.000) (0.000) (0.391)
r 1.0816*** 2.0645*** 0.9518** 0.9147*** 0.9147*** 0.8961***
(0.000) (0.000) (0.021) (0.000) (0.000) (0.000)
% of lower regime 75.96% 79.38% 72.15% 69.45% 69.45% 68.27%
95% conf. Interval of r [1.0717, 1.0915] [1.9377, 2.1914] [0.1411, 1.7624] [0.5761, 1.2533] [0.5432, 1.2862] [0.6204, 1.1718]

Technological Forecasting & Social Change 177 (2022) 121514

# of moment conditions 90 171 216 261 288 315
linearity test (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)

Notes: *, **, *** represent statistically significant at 10%, 5%, and 1% levels, respectively. The z-values are in parentheses. The dynamic panel threshold estimators are obtained using Stata module xthenreg (Seo et al.,
2019), which is a non-commercial and downloadable program module on Statistical Software Components (SSC). Please note that the module xthenreg returns the coefficients and z-values of the lower regime and the
difference (between the lower regime and the upper regime). The coefficients of upper regime are calculated, and the z-values are the z-values of the difference.
J. Pang et al.
the size of shadow economy, which has been widely used for symmetric
analysis (Zhang et al., 2019). Table 3 and Table 4 list the GMM esti­
mation results that given by Equ. (2) and Equ. (8). The short-run dy­
namics are shown in Table 3, while the long-run results are reported in
Table 4. The advantage of GMM is that it can correct the bias from
potentially endogenous problems caused by instrumenting endogenous
variables, such as the lagged ones. Afterall, searching for valid external
instruments can be exceedingly difficult. The system GMM estimator is
better than the difference GMM estimator as it allows more instrument
variables to make the results more efficient. To be more specific, the
two-step system GMM estimator is better than the one-step system GMM
estimator, which does not consider the heteroscedasticity. To sum up,
this article will employ the two-step system GMM estimator.
The dependent variables are shadow economy for both Table 3 and
Table 4. Columns (1) to (6) presents results by adding the key explan­
atory variables one by one. The statistically significant AR(1) test and
statistically insignificant AR(2) test prove no self-correlation problems
in any of the error terms among those models. Also, the statistically
insignificant Hansen test indicates the effectiveness of the chosen in­
strument variables.
Firstly, the short-term results in Table 3 show that the lagged shadow
economy has positive and statistically significant effects on the current
size of shadow economy. The current size can be hardly removed within
a short period and therefore can be greatly affected by previous situa­
tion, which can also be called as the accumulating impacts. The speed of
adjustment, γ, ranges between 24.8% and 69.5%. These results indicate
that the previous scale of shadow economy can increase at least 30.5% of
the current scale within a year.
Secondly, urbanization level has a positive effect while the squared
urbanization level shows a negative effect on the size of shadow econ­
omy, indicating an inversed U-shaped relationship, for both short-term
and long-term estimation. For the statistical significance of the co­
efficients, the ones of the short-term outputs are more significant than
the ones of the long-term outputs. For the magnitudes of the coefficients,
the mean value of the urbanization level and its square in the short run/
long run are 0.0160/0.0078 and -0.0012/-0.0015, respectively. 1% in­
crease of the urbanization level will lead to 1.60% increase of the
shadow economy’s size in the short term and 0.78% increase in the long
term. As the scale and speed accelerate during the beginning of urban­
ization process, the size of shadow economy can easily get increased.
Afterall, the unsound economic system can lead to various consequences
to the market. Non-standard competition may result in more pressures
coming from high cost. However, when the development of urbanization
reaches to a certain extent, the scale of shadow economy can be fully
managed with the sound economy system.
Thirdly, there is an inversed U-shaped relationship between eco­
nomic growth and the scale of shadow economy as well, which is
consistent with the EKC assumption. During the beginning of the eco­
nomic development, shadow economy will increase along with the
official economy. But the developed economic system can prevent from
the above situation, as the differences between the developing countries
and the developed countries. The coefficient under the long-term esti­
mation is more statistically significant than the one under the short-term
estimation. Like the urbanization, the impact from economic develop­
ment on the scale of shadow economy tends to reflect more in the long
run. The mean values of the economic growth and its squared term are
1.9592/2.0748 and -13.2490/-25.6083 for the short run/long run,
respectively.
None of the coefficients of the energy consumption is statistically
significant or shows opposite effects in the short-term and long-term
outcomes. In this empirical analysis, there is no strong evidence com­
ing from the estimation results to prove the effect from energy con­
sumption on the scale of shadow economy. On the contrary, the
coefficients for the FDI are negative and statistically significant at least
at the 0.1 level, indicating that FDI can be helpful when comes to the
shadow economy management in both short and long terms. The mean
10
Technological Forecasting & Social Change 177 (2022) 121514
value of the magnitude is 0.0149 for the short term and 0.0075 for the
long term. The effect in the short term is stronger as the magnitude is
relatively larger. Most statistically significant coefficients of the tertiary
industry carry positive signs, signifying the increase of the shadow
economy scale. In general, cash transaction can be quite common in the
tertiary industry, which can be a large component of shadow economy
as easy taxes evasion. Especially in China, where illegal peddlers do
business in tourist attractions due to non-standard management system.
The negative sign of the environmental regulation shows that the scale
of shadow economy can be controlled by the environmental regulation.
But either of the coefficients are statistically significant, meaning that
the symmetric effects from environmental regulation are not obvious.
4.2. Dynamic Panel Threshold Estimation- asymmetric effects analysis
Table 5 and Table 6 report the estimation results for the asymmetric
panel threshold model given by Equ. (6) and Equ. (9), respectively. The
short-run dynamics are shown in Table 5, while the long-run results are
reported in Table 6. This study names the urban (urbanization level) as
the transition variable. And the threshold value is shown as r, which is
procured through a grid search of the transition variable over the range
between the 15th and 85th percentiles. The 95% confidence interval for
the estimation of the threshold parameter is obtained with the method
proposed by (Hansen, 1999). The situations will be summarized as the
lower or upper regime once the magnitude of the transition variable is
less than (including equaled value) or greater than the estimated
threshold magnitude. The bottom line of the table is the p-value of the
bootstrap test of linearity. The null hypothesis is H0 : β1 = β2 , against
the alternative hypothesis: H1 : β1 ∕ = β2 2. The number of bootstrapping
for linearity test in this study is 1,000. Explanatory variables are added
one by one under Model 1 to Model 6 under respective columns.
The coefficients under lower regimes for the first lagged shadow
economy are negative while the ones under upper regimes are positive.
All the coefficients are statistically significant at least at 0.05 level,
except the one for lower regime under Model 5. In that case, the current
scale of shadow economy will be affected negatively by the previous
situation when urbanization level is under or equal to the threshold
value. And the situation will be reversed when the urbanization level
reaches and exceeds the threshold value. In all the six models, the speeds
of adjustment under lower regimes are at least twice bigger than the
ones under upper columns.
The opposite signals of the coefficients between urbanization level
and its squared term confirm the relationship with an inversed U-shape
of urbanization with the scale of shadow economy, not only for both
lower and upper regimes but also for both short-rung and long-run
estimation, except the coefficient for the upper regime under Model 3
in Table 6. The size of shadow economy will be redoubled as the
development of urbanization, especially during the beginning. But when
the urbanization level reaches to the point where the economic system is
well-developed and the regulations are strong, the scale of shadow
economy can be effectively controlled. The above phenomenon is well
explained by the difference between the developed countries and the
developing countries. The coefficients in the long-run results are more
statistically significant than the ones in the short run, indicating that the
inversed U-shape tends to happen more in long-term effects, which is
opposite with the short-term preference results in GMM estimation. To
sum up, the symmetry tends to happen in the short-term relationship
while the asymmetry tends to happen in the long-term relationship. The
magnitudes for the coefficients in the short run/ long run of urban for
the lower regime are 3.1253/ 2.8365, for the upper regime are 0.1944/
0.1311. The magnitudes for the coefficients in the short run/ long run of
the squared urban for the lower regime are -2.5657/ -0.2099, for the
3
Monte Carlo simulation studies will be conducted for bootstrap-based
testing procedure. For details, please see (Seo et al., 2019).
J. Pang et al.
upper regime are -0.0098/ -0.0075. The short-run impacts are stronger
than the long-run impacts.
Economic growth also has an inversed U-shaped relationship with
shadow economy as the coefficients of GDPgr are positive while the ones
for GDPgr_s are negative, which are consistent with both symmetric and
asymmetric analysis for both short term and long term. The only dif­
ference is the coefficients under Model 6 for lower regime in Table 6.
Some costs must be paid during the beginning of economic develop­
ment, such as illegal economic activities spring up by taking advantages
of unsound economic system, which will be improved with development
of economy. As for urbanization, this situation is beautifully illustrated
in the comparison of status quo between developing countries and
developed countries. The coefficients in the short-run results are less
statistically significant than the ones in the long-run results, indicating
that the asymmetric inverted U-shaped relationship tends to exist in the
long term, which is consistent with the symmetric GMM estimation re­
sults. The average magnitude of the GDPgr in the short run/ long run for
lower regime and upper regime are 0.8294/ 0.1253 and 0.3926/ 0.2462,
respectively. The average magnitude of the GDPgr_s in the short run/
long run for lower regime and upper regime are -3.1198/ -0.0908 and
-2.2457/ -1.5645, respectively. As the results of urbanization, the short-
term effects are stronger than the long-term effects.
Only few coefficients for energy consumption in the short-term
analysis are statistically significant. According to three coefficients
with high significance, conclusions can be drawn that energy con­
sumption has negative effect for the lower regime while has positive
effect for the upper regime. The signals under the long-term analysis are
consistent with the ones for the short-term analysis. Therefore, when the
urbanization level is low, the increasing of energy consumption can be
helpful for the controlling of shadow economy but turns to be harmful
when the urbanization level reaches to the turning point. The co­
efficients in the long-term analysis are much more statistically signifi­
cant. In that case, the effects from energy consumption on the scale of
shadow economy tends to be a long-run relationship.
In the short-term asymmetric analysis, the statistically significant
coefficients of FDI show positive effects on the scale of shadow economy,
both for lower regime and upper regime. In the long-term asymmetric
results however, the effect for the lower regime is positive while for the
upper regime is negative. In fact, the influence of FDI on economic
development has always been two-sided. On the one hand, FDI can bring
high technologies and effective equipment, which will be beneficial to
the development of both economy and society. On the other hand, FDI
often comes along with more polluted industries importing to devel­
oping countries to achieve self-profitability at the expense of the envi­
ronment over there.
The coefficients of the tertiary industry in the long run are more
statistically significant than the ones in the short run, indicating that the
effects from tertiary industry are inclined to have long-term properties.
Except the one under Model 5 of Table 6 for the upper regime, most
positive signals demonstrate that tertiary industry has positive effects on
the scale of shadow economy, which is consistent with the symmetric
analysis. Overusing of cash in the tertiary industry can provide plenty of
opportunities for the development of shadow economy. It is not saying
that all cash transaction will be summed up as part of shadow economy.
Only because cash transactions can be difficult to trace therefore can
easily evade taxes, which will be included as components of shadow
economy.
The asymmetric effect of environmental regulation in the short-run
outcome is statistically significant at 0.01 level, while the one in the
long-run outcome is not. The influence from environmental regulation
tends to show more in the short term. Compared with symmetric anal­
ysis, the asymmetric results show opposite effects when the urbanization
is lower (with equaled value) or higher than the threshold value. For
places with lower urbanization level, the implementation of environ­
mental regulation is helpful to control the scale of shadow economy, but
not for places with higher urbanization level. Developed urbanization
11
Technological Forecasting & Social Change 177 (2022) 121514
level may come with tough competition and a lot of pressures, and
companies will face more cost coming from environmental protection.
Strengthening regulations may lead to more shadow productions with
which companies can keep profits.
4.3. Comparation
Based on the above results, the contributions of this study can be
proved. First, this is the first study that analyses both the short-run and
long-run relationship between urbanization and shadow economy. The
results are consistent with the previous studies. Second, this is also the
first study that analyzes both symmetric and asymmetric relationship
between urbanization and shadow economy. the results are also
consistent with the previous studies. To sum up the above two contri­
butions, this study proves the robustness of the previous conclusions
about the relationship between shadow economy and urbanization
through new aspects: short-run/ long-run aspect and symmetric/
asymmetric aspect. Third, this study also uses new sub catalogs under
entropy weight method to calculate urbanization. As current research
does not have consistent official calculation of the level of urbanization,
the sub catalogs this study applies can make contributions. Many
research only uses urban population to define urbanization level, which
is obviously not enough. Industrialization is also another popular indi­
cator for urbanization level measurement. However, the current devel­
oping pattern of metropolis is industrial restructuring, that is the
transition from the secondary industry to the tertiary industry. There­
fore, the determining factor of urbanization should be redefined. In this
study, the night light data object under the living condition indicator
plays the most important role, which has been used by many articles to
study urbanization level (Ch et al., 2020; Ma et al., 2012; Stokes and
Seto, 2019; Wang et al., 2020; Yi et al., 2016), along with many other
objects to fully cover all important influence factors. In that case, the
calculated measurement of urbanization in this study has been proved to
be more comprehensive.
5. Conclusion
This study investigates the effect of the urbanization level on the
scale of shadow economy by applying the panel data for each province of
China from 2008 to 2017. In particular, this research proposes brand
new empirical analysis approaches by modelling short-term and long-
term outcomes in both symmetries and asymmetries aspects. Two
quality specifications, MIMIC and entropy weight theory are utilized
respectively to estimate the top two variables, the scale of shadow
economy and the urbanization level. Other variables including the
economic growth, energy consumption, FDI, tertiary industry and the
environmental regulation has also been estimated for their effects on the
scale of shadow economy. Most of the previous studies mainly focus on
pollution, climate change or official economy, yet rare research has
analyzed the relationship between shadow economy and urbanization,
as the situation that two of them are both common in the developing
countries can scarcely be coincidence.
The results from the estimation show that the differences between
the symmetric and asymmetric analyses are rarely small, for both short
run and long run. The urbanization level does influence the scale of
shadow economy, which is an inversed U-shaped relationship in
particular. The urbanization level will firstly increase the size of shadow
economy then decrease the size when its development process reaches to
the turning point. The differences between developed countries and
developing countries in consideration of the above two situations
confirm this result. Also, this paper proves the EKC relationship between
the scale of shadow economy and economic growth. The beginning of
economic growth must take some consequences for fast development
rate, and widespread shadow economy is one of those consequences. But
this situation will be controlled and then eliminated when the sound
regulation system has been established along with developed economy.
J. Pang et al.
Those above two results are consistent in both symmetric and asym­
metric analyses for both short run and long run. The symmetric effect
from energy consumption on shadow economy is not statistically sig­
nificant and shows opposite results between short run and long run, so
does the asymmetric effect. The influences from energy consumption
may be complicated therefore hard to be summarized. The effect from
FDI is mainly positive, indicating that FDI is not beneficial in view of
controlling shadow economy. Tertiary industry primarily shows positive
impact on shadow economy, while environmental regulation shows
negative symmetric impact. In the asymmetric analysis, environmental
regulation reveals negative effect for the lower regime but positive effect
for the upper regime.
5.1. Theoretical Contributions
5.1.1. Why urbanization can influence shadow economy
A large part of the urbanization process is reflected in the migration
of rural population to urban areas. The impact of this phenomenon on
shadow economy can be roughly divided into pull and push factors,
which has been studied by many previous research. In view of the
inversed U-shaped impacts of urbanization on shadow economy, this
paper will analyze why the impact of urbanization on the scale of
shadow economy will switch overtime with the development of
urbanization.
In the early stage during the development of urbanization, its im­
pacts on the scale of shadow economy are generally positive. First,
driven from the advantages of urbanization: The development of ur­
banization will bring people many benefits. First, there will be more and
diversified employment opportunities, making it easier for people to
find satisfying working opportunities. Secondly, the income levels in
urban are generally much higher than those of rural areas. Finally, ur­
banization will also provide more, better, and comprehensive social
services, making living conditions in urban area more comfortable and
pleasant. Specifically in China, Hukou system has brought urban life
with more significant advantages over rural life. Urban hukou can
provide more conveniences in aspects including but not limited to ed­
ucation, health care, and housing purchase, which are the most impor­
tant three influence factors for living standard. Therefore, the various
advantages of urban will attract many rural labors to migrate to urban
area. However, the rural labors often lack education level and profes­
sional skills, yet cannot compete with the urban labor force, therefore
are difficult to find satisfy positions. In addition, urban life is superior
but also expensive, forcing rural labor to turn to shadow section to
support family. In particular, the wages of many shadow sections in
urban are no less than those of official jobs, which, coupled with low
entry barriers and no training requirements, are more attractive to rural
labor force.
Second: environmental pollution: The development of urbanization
may also lead to climate change and heavy pollution. The government
will then formulate environmental regulations to forbit that yet giving
companies more pressures for environmental protection. As the primary
purpose of any companies is benefits, they would rather conduct shadow
production even they have to weigh between cost saving and expensive
punishment.
Third, industrialization process and technology development: The
process of industrialization is a very important factor to promote the
process of urbanization. And the degree of scientific and technological
development is closely related to industrialization. In the early stage
during the development of urbanization, industrialization brings more
advanced science and technology to urban areas. And the imbalance of
science and technology progress will lead to the imbalance of income;
The development of industrialization will also lead to decreasing agri­
cultural productions. At the same time, the technological progress
brought by industrial development will greatly improve labor produc­
tivity, thus reducing labor demand, making rural labors have no choice
but to migrate to urban areas. And rural labor normally engaged in
12
Technological Forecasting & Social Change 177 (2022) 121514
shadow sectors when living in urban areas.
In the later stage during the development of urbanization, its impacts
on the scale of shadow economy are generally negative. First, industri­
alization process and technology development: The industrialization
process and the development of science and technology have two-side
influences. In the early stage, as mentioned above, it will help the ur­
banization to increase the scale of shadow economy, but in the later
stage during the development of urbanization, it will help the urbani­
zation to decrease the scale of the shadow economy. First, the growth of
urbanized population will further increase the pressure of urban life,
thus reducing the migration of rural population to urban area. Second,
rural laborers who live in urban will accumulate wealth over time,
eliminating their needs to engage in shadow productions, which are
risky and have no basic insurances. Technological development will
reduce labor demand but also increase production efficiency, increasing
rural incomes and eliminating the needs to work in urban area in the
long run. In addition, China has a huge population base, with the rapidly
economic development rates in China during recent years, people’s
living standards have improved greatly, leading to the increases in the
demands for total grain productions. The government has also imple­
mented a series of policies to support and subsidize agricultural pro­
ductions. In addition, the rapid development of the internet and various
livestreaming platforms in China has also provided farmers with more
ways to sell their products. Combined with the prosperity of China’s
postal service and express delivery industry, even during natural di­
sasters, rural labors can still sell agricultural products throughout the
country or even overseas in the form of live broadcasting and express
delivery, which increases incomes but greatly reduces losses at the same
time. But those above transactions can easily evade supervisions from
government and go under shadow sections.
Second, capital accumulation: Traditional economic production ac­
tivities are more likely to include shadow production, such as handicraft
productions and traditional industrial activities. The impact of the
emergence of large enterprises on traditional economic activities can be
enormous. Large firms prefer capital monopoly because it can help them
increase revenues while reducing risks. The process of capital concen­
tration is also known as Monopoly Capital (Foster et al., 2011).
Compared with small firms that are easier to process shadow produc­
tion, large firms have the advantages with higher capital storage, more
diversified products, stronger research and development, wider access
to information and more government supports. Therefore, it is difficult
for small and medium-sized enterprises to survive under the squeeze
from large enterprises, which then reduces the opportunities for small
and medium-sized enterprises to carry out shadow productions.
Third, marketing: Marketing is the product of the development of the
new era, the development of marketing makes many traditional pro­
ductions gradually replaced by emerging markets. Traditional pro­
ductions, as mentioned above, often involves a certain amount of
shadow economy. Compared with homogeneous conventional pro­
ductions, emerging markets are more diverse and therefore are easier to
attract young consumers.
5.1.2. Significances on asymmetric
In the symmetric results, the coefficients of urbanization and its
square term in the short term are 0.0160 and -0.0012, respectively. The
ones in the long term are 0.0078 and -0.0015, respectively. Therefore,
there is not much difference between the symmetric impacts in either
the short term or the long term when comes to the relationship between
urbanization and shadow economy, but not the asymmetric impacts.
The significance of asymmetry lies in that although the impact of ur­
banization on shadow economy is inverted U-shaped in both the short
and long term, the level of the impact is not invariable. In the lower
regime, before the restructuring point, the short-term effects of urban­
ization and its squared term are 3.1253 and -2.5657, respectively; The
long-term effects are 2.8365 and -2.0994, respectively. However, in the
upper regime, after the restructuring point, the short-term effects
J. Pang et al. Technological Forecasting & Social Change 177 (2022) 121514

become 0.1944 and -0.0098, while the long-term effects become 0.0993
and -0.0059. By comparison, although there is an inverted U-shaped
relationship both before and after the restructuring point, the co­
efficients can vary greatly, and the magnitudes of the coefficients before
the restructuring point are much higher than those after the restruc­
turing point.
5.2. Practical contributions
The asymmetric results from this study can provide new ideas for the
governance and policy makers on how to control the scale of shadow
economy caused by the development of urbanization. For example, the
governances and supervisions of the shadow economy should be espe­
cially strengthened before the development of urbanization reaches the
restructuring point, as during that period the influences can be
remarkably strong. In addition, the threshold method employed in this
article can accurately find the position of the restructuring point, which
reduces a lot of difficulties for practical implementations. After all,
perfect symmetric relationships are often absent from any empirical
analysis, which is why many studies use not just one restructuring point,
but two or even three. And restructuring point exists does not mean that
the linear relationship has a fundamental change. For example, in this
paper, the relationship before and after the restructuring point is
consistent with each other, the only difference is the slope of the curve.
According to the above analysis, urbanization development in the later
stage is conducive to the suppression of the scale of shadow economy.
That is why, in the results of this paper, the degree of influences from
urbanization before the restructuring point is higher than that after the
restructuring point.
Government should also try to reduce the size of shadow economy
from the perspective of urbanization. For example, addressing the
imbalance in the distribution of urban and rural employment
population, solving the difficulties for rural labor to find formal and
legal jobs in cities. As the World Bank says, the ultimate goal of ur­
banization is to create a sustainable green city community.
5.3. Limitations
Although this paper provides new ideas for the following studies, it
fails to find out the specific ways of energy consumption’s influence on
shadow economy. Also, the basic assumption of this study is that the
interaction between shadow economy and pollution is simple linear. But
it could be non-linear interaction relationship between those two, too.
Then how urbanization and other influence factors have the non-linear
effects on the interaction relationship should be further discussed. Those
can be used as new ideas for the following research.
CRediT author statement
Jingru Pang: Conceptualization, Methodology, Program, Data
collection, Writing- Original draft preparation.
Nan Li: Discussion, Investigation.
Hailin Mu: Discussion, Supervision, Funding acquisition.
Xin Jin: Data collection, Program.
Ming Zhang: Writing- Reviewing and Editing, Supervision, Program
Administration, Funding acquisition.
Acknowledgments
The authors would like to gratefully acknowledge the financial
support from National Natural Science Foundation of China (72174195,
51976020, 71603039). We would like to thank the anonymous referees
for their constructive suggestions and valuable comments on the earlier
draft of this paper, upon which we have improved the content.

Appendix

A. MIMIC Model

The multiple indicators and multiple indexes model is one kind of structural equation model. The general principle of structural equation model is
to find the indicators and the causes related to the unobservable variable, and then establish the model through the relationship among the three
variables, so as to simulate the observed value of the unobservable variable. It mainly contents two parts: the first part is the structural equation
representing the relationship between the observed data and the causes leading to its generation. The second part is the measurement equation
representing the relationship between the observed data and the indicators that will be affected by it. The formula of the specific equation is shown in
Fig. A1:

α1 β1

α2 β2
Unobservable
Variable
… …

αp βq

Fig A1. Schematic Diagram for MIMIC Model

13
J. Pang et al. Technological Forecasting & Social Change 177 (2022) 121514

The structural equation for MIMIC model is:

X = p1 α1 + p2 α2 + ⋯ + pm αm + ξ (A1)
Where X represents the size of shadow economy, α1, α2 and αm represent the causes that will lead to shadow economy, p1, p2 and pm are the
coefficients, ξ is the random disturbance term.
The measurement equation of MIMIC model is:
⎧
⎪
⎪ β = q1 X + ε1
⎨ 1
β2 = q2 X + ε2
(A2)
⎪
⎪ ⋯
⎩
βn = qn X + εn

Where β1, β2 and βn represent indicators that will be affected by shadow economy. q1, q2 and qn are the coefficients, ε1, ε2 and εn are the error terms.
It is assumed that the mean values of random disturbance term ξ and the measurement error term ε are both 0 and independent, and the mea­
surement error term ε is not related to the invisible economy X. Then: E(ξε′ ) = 0, E(ξξ) = θ2 , E(εε ) = σ2 .
′

Combining Equ. A1 with Equ. A2 to express it in the form of multiple regression equation:
∑
(A3)
′ ′
β = q(p α + ξ) + ε = qp α + qξ + ε = α+μ

Where Σ=qp’ represents the coefficient matrix, μ=qξ+ε represents the disturbance vector. Therefore, the error covariance matrix of the multiple
regression equation can be expressed as:
′
(A4)
′ ′
E(μμ ) = E(qξ + ε)(qξ + ε) = θ2 qq + σ2
Before estimating β in the equation, it is necessary to presuppose vector q as a certain value before normalization. Normally it will be set as 1.
In this study, there will be five causes (tax, resident income, unemployment rate, self-employment rate, and government regulation) and two
indicators (the actual GDP growth rate and the labor force participation rate). All the data are acquired from China Statistical Yearbook. The detailed
definitions for all the causes and indicators are shown in Table A1.

Table A1
Detailed definitions for all the causes and indicators
tax the percentage of government tax on GDP
resident income per capita disposal income
unemployment rate unemployment rate for the city
self-employment rate percentage of individual private on total employment
government regulation the percentage of government expenditures on GDP
the actual GDP growth the growth rate of the market value of all final products in
rate the current year calculated using the price of one previous
year as the base period
the labor force the percentage of the total employment on the total
participation rate population between age 15 to 64
References
Aglietta, M., 1998. A Theory of Capitalist Regulation: The US Experience. Verso, New
York.
Baksi, S, Bose, P., 2010. Environmental Regulation in the Presence of an Informal Sector.
Departmental Working Papers.
Boyce, JK., 1993. The Philippines: the political economy of growth and impoverishment
in the Marcos era. : The Philippines: the political economy of growth and
impoverishment in the Marcos era.
Ch, R, Martin, DA, Vargas, JF., 2020. Measuring the size and growth of cities using
nighttime light. Journal of Urban Economics.
Chen, HY, Hao, Y, Li, JW, Song, XJ., 2018. The impact of environmental regulation,
shadow economy, and corruption on environmental quality: Theory and empirical
evidence from China. Journal of Cleaner Production 195, 200–214.
Colenbrander, S., 2016. Cities as engines of economic growth: the case for providing
basic infrastructure and services in urban areas. International Institute for
Environment and Development Working.
Dang, VA, Kim, M, Shin, Y., 2012. Asymmetric capital structure adjustments: New
evidence from dynamic panel threshold models. Journal of Empirical Finance 19,
465–482.
Daniels, PW., 2004. Urban challenges: the formal and informal economies in mega-cities.
Cities 21, 501–511.
Dong, HM, Xue, MG, Xiao, YJ, Liu, YS., 2021. Do carbon emissions impact the health of
residents? Considering China’s industrialization and urbanization. Science of the
Total Environment 758.
Elgin, C, Oyvat, C., 2013. Lurking in the cities: Urbanization and the informal economy.
Structural Change and Economic Dynamics 27.
Elgin, C, Öztunalı, O., 2014. Environmental Kuznets Curve for the Informal Sector of
Turkey (1950-2009). Panoeconomicus 61, 471–485.
Fischer, EO, Robert, H, Zechner, J., 1989. Dynamic Capital Structure Choice: Theory and
Tests. The Journal of Finance 44, 19–40.
Foster, JB, Mcchesney, RW, Jonna, RJ., 2011. Monopoly and Competition in Twenty-
First Century Capitalism. Monthly Review: An Independent Socialist Magazine 62, 1.
Frey, BS, Weck-Hanneman, H., 1984. The hidden economy as an ’unobserved’ variable.
European Economic Review 26, 33–53.
Goel, RK, Nelson, MA., 2016. Shining a light on the shadows: Identifying robust
determinants of the shadow economy. Economic Modelling 58, 351–364.
Hansen, BE., 1999. Threshold effects in non-dynamic panels: Estimation, testing, and
inference. Journal of Econometrics 93, 345–368.
Hao, Y, Zheng, SQ, Zhao, MY, Wu, HT, Guo, YX, Li, YW., 2020. Reexamining the
relationships among urbanization, industrial structure, and environmental pollution
in China—New evidence using the dynamic threshold panel model. Energy reports 6,
28–39.
Hart, K., 2008. Informal Economy. In: Durlauf, S.N., Blume, L.E. (Eds.), The New
Palgrave Dictionary of Economics. Macmillan, Palgrave.
Hasen, L., 1982. Large Sample Properties of Generalized Method of Moments Estimators.
Econometrica 50, 1029–1054.
Huynh, CM., 2020. Shadow economy and air pollution in developing Asia: what is the
role of fiscal policy? Environmental Economics and Policy Studies 1–25.
Ihrig, J, Moe, KS., 2003. Lurking in the shadows: the informal sector and government
policy. Journal of Development Economics 73, 541–577.
Kookana, RS, Drechsel, P, Jamwal, P, Vanderzalm, J., 2020. Urbanisation and emerging
economies: Issues and potential solutions for water and food security. The Science of
the total environment 732, 139057-139057.
Lazăr, D, Minea, A, Purcel, A., 2019. Pollution and economic growth: Evidence from
Central and Eastern European countries. Energy Economics 81, 1121–1131.
Li, BQ, Chen, CL, Hu, BL., 2016. Governing urbanization and the New Urbanization Plan
in China. Environment & Urbanization 28, 515–534.
Liu, W, Zhan, JY, Zhao, F, Wei, XQ, Zhang, F., 2021. Exploring the coupling relationship
between urbanization and energy eco-efficiency: A case study of 281 prefecture-level
cities in China. Sustainable Cities and Society 64, 102563.
Luo, XM, Sun, K, Li, L, Wu, SM, Yan, D, Fu, XS, et al., 2020. Impacts of urbanization
process on PM2.5 pollution in "2+26" cities. Journal of Cleaner Production.
Lv, YL, Chen, W, Cheng, JQ., 2020. Effects of urbanization on energy efficiency in China:
New evidence from short run and long run efficiency models. Energy Policy 147,
111858.
Ma, T, Zhou, CH, Pei, T, Haynie, S, Fan, JF., 2012. Quantitative estimation of
urbanization dynamics using time series of DMSP/OLS nighttime light data: A
comparative case study from China’s cities. Remote Sensing of Environment 124.
Mazhar, U, Elgin, C., 2013. Environmental regulation, pollution, and the informal
economy. SBP Research Bulletin 9, 62–81.
McDonald, RI, Weber, K, Padowski, J, Flörke, M, Schneider, C, Green, PA, et al., 2014.
Water on an urban planet: Urbanization and the reach of urban water infrastructure.
Global Environmental Change 27, 96–105.
McGranahan, G., 2015. Urbanization. International Encyclopedia of the Social &
Behavioral Sciences (Second Edition) 958–964.
Meng, GF, Guo, Z, Li, JL., 2021. The dynamic linkage among urbanisation,
industrialisation and carbon emissions in China: Insights from spatiotemporal effect.
Science of the Total Environment 760.
Muñoz, P, Zwick, S, Mirzabaev, A., 2020. The impact of urbanization on Austria’s carbon
footprint. Journal of Cleaner Production 263, 121326.
Nickell, SJ., 1981. Biases in Dynamic Models with Fixed Effects. Econometrica 49.

14
J. Pang et al.
Pang, JR, Li, N, Mu, HL, Zhang, M., 2021. Empirical analysis of the interplay between
shadow economy and pollution: With panel data across the provinces of China.
Journal of Cleaner Production 285, 124864.
Pang, JR, Mu, HL, Zhang, M., 2020. Interaction between shadow economy and pollution:
empirical analysis based on panel data of northeast. China. Environmental Science
and Pollution Research 27, 21353–21363.
Qiu, G, Song, R, He, SW., 2019. The aggravation of urban air quality deterioration due to
urbanization, transportation and economic development – Panel models with
marginal effect analyses across China. Science of The Total Environment 651,
1114–1125.
Rauch, JE., 1993. Economic Development, Urban Underemployment, and Income
Inequality. The Canadian Journal of Economics /Revue canadienne d’Economique
26.
Roodman, D., 2009. How to do Xtabond2: An Introduction to Difference and System
GMM in Stata. The Stata Journal 9, 86–136.
Schneider, F, Buehn, A, Montenegro, C., 2010. Shadow Economies All Over The World:
New Estimates For 162 Countries From 1999 To 2007. The World Bank.
Seo, MH, Kim, S, Kim, Y., 2019. Estimation of dynamic panel threshold model using
Stata. The Stata Journal 19, 1–12.
Shemshadi, A, Shirazi, H, Toreihi, M, Tarokh, MJ., 2011. A fuzzy VIKOR method for
supplier selection based on entropy measure for objective weighting. Expert Systems
With Applications 38.
Shen, LY, Zhou, JY, Skitmore, M, Xia, B., 2015. Application of a hybrid
Entropy–McKinsey Matrix method in evaluating sustainable urbanization: A China
case study. Cities 42.
Sheng, PF, Zhai, MX, Zhang, YC, Kamal, MA., 2020. The effects of urbanization on
household wastewater emissions in China: Efficient- and inefficient- emissions.
Environmental Pollution 267, 115350.
Stokes, EC, Seto, KC., 2019. Characterizing urban infrastructural transitions for the
Sustainable Development Goals using multi-temporal land, population, and
nighttime light data. Remote Sensing of Environment 234, 111430.
Sun, W, Huang, CC., 2020. How does urbanization affect carbon emission efficiency?
Evidence from China. Journal of Cleaner Production 272, 122828.
UN, 2017. Habitat III- New Urban Agenda. http://habitat3.org/(last accessed 16 Dec
2019).
UNDESA, 2018. World urbanisation prospects 2018. UN Department of economic and
social affairs: population dynamics. https://population.un.org/wup/(last accessed
16 Dec 2019).
Wang, YH, Liu, ZF, He, CY, Xia, P, Liu, ZW, Liu, HM., 2020. Quantifying urbanization
levels on the Tibetan Plateau with high-resolution nighttime light data. Geography
and Sustainability 1.
Wang, ZB, Qi, GZ, Wei, WD., 2021. China’s coastal seawater environment caused by
urbanization based on the seawater environmental Kuznets curve. Ocean and Coastal
Management 213.
Wang, ZH, Yang, ZY, Zhang, B, Li, H, He, WJ., 2021. How does urbanization affect
energy consumption for central heating: Historical analysis and future prospects.
Energy and Buildings.
WB. The World Bank. Urban Development: Overview. https://www.worldbank.
org/en/topic/urbandevelopment/overview (Last accessed 20 April 2020)., 2020.
Wu, HT, Hao, Y, Weng, J., 2019. How does energy consumption affect China’s
urbanization? New evidence from dynamic threshold panel models. Energy Policy
127, 24–38.
15
Technological Forecasting & Social Change 177 (2022) 121514
Wu, JS, Cheng, DJ, Xu, YY, Huang, Q, Feng, Z., 2021. Spatial-temporal change of
ecosystem health across China: Urbanization impact perspective. Journal of Cleaner
Production 326.
Xu, T, Lv, ZK, Xie, LQ., 2018. Does Country Risk Promote the Informal Economy? A
Cross-National Panel Data Estimation. Global Economic Review 47.
Yi, KP, Zeng, Y, Wu, BF., 2016. Mapping and evaluation the process, pattern and
potential of urban growth in China. Applied Geography 71, 44–55.
Yu, BL, Shi, KF, Hu, YJ, Huang, C, Chen, ZQ, Wu, JP., 2015. Poverty Evaluation Using
NPP-VIIRS Nighttime Light Composite Data at the County Level in China. IEEE
Journal of Selected Topics in Applied Earth Observations and Remote Sensing 8,
1–13.
Zhang, M, Liu, XX, Ding, YT, Wang, WW., 2019. How does environmental regulation
affect haze pollution governance?—An empirical test based on Chinese provincial
panel data. Science of the Total Environment 695, 133905.
Zhao, JF, Tang, JM., 2018. Industrial structure change and economic growth: A China-
Russia comparison. China Economic Review 47, 219–233.
Zhao, JJ, Chai, LH., 2015. A novel approach for urbanization level evaluation based on
information entropy principle: A case of Beijing. Physica A: Statistical Mechanics and
its Applications 430.
Zhong, C, Hu, RF, Wang, MY, Xue, WH, He, LF., 2020. The impact of urbanization on
urban agriculture: Evidence from China. Journal of Cleaner Production 276, 112686.
Jingru Pang: she is a PhD student at Dalian University of Technology, who majored in
energy and environment. Her research interests include shadow economy, environmental
protection, and urbanization. She has published 2 SCI papers in the field of environmental
protection.
Nan Li: he is an associate professor at Dalian University of Technology, who majored in
energy and environment and received his PhD degree in 2014. He is interest in the research
of energy supply and demand modeling, technology and policy of greenhouse gas emission
reduction, and regional convergence theory demonstration and modeling. He has pub­
lished more than 25 academic papers.
HaiLin Mu: he is a professor at Dalian University of Technology, who got his PhD degree of
Internal Combustion Engine in 1994, and PhD degree of engineering in 2004 at Saitama
University, Japan. He has published more than 100 SCI paper on journals including En­
ergy, Applied Energy, Energy Policy, and Energy Economics.
Xin Jin: he is graduate student at Dalian University of Technology, who will receive his
master’s degree in 2021. His research interests focus on the regional convergence theory
demonstration and modeling.
Ming Zhang: he is a professor at China University of Mining and Technology, who received
his PhD of engineering in 2009. His research interests include low-carbon economy and
environmental management. He has published more than 100 academic papers on journals
including Journal of Cleaner Production, Resources, Conservation and Recycling, Energy
Policy, Ecological Economics, Ecological Indicators, Applied Energy, and Energy.