Modelling the nexus between income inequality and shadow economy in Nigeria

Purpose — This paper aims to examine the relationship between shadow economy and income inequality in Nigeria.Method The employed Autoregressive Distributed Lag (ARDL), Fully Modified Ordinary Least Square (FMOLS), Granger causality. methodology is used avoid endogeneity heterogeneity model. gauged using two diverse indicators of Gini coefficient: index proportion household disposable market income. In accordance with literature, our empirical analysis draws on data from Standardized World Income Inequality Database (SWIID), Bank, Development Indicators, International Country Risk Guide (ICRG) for Nigeria 1991 2018.Result findings ARDL FMOLS suggested a positive economy, based both measures inequality. short term, however, are negatively correlated. Furthermore, we discovered one-way causal exists income, institutional democracy, corruption control (CCI).Recommendation Shadow has been regarded as an avenue create job opportunities raise poverty-income levels. It critical that, reduce Nigeria, policymakers should develop much better policies aimed at addressing inequality.Contribution order understand activities this study three methodologies, namely: Lags Squares Causality. result offers reliable recommendations pro-poor interventions that aim limit growth informality via redistributing incomes.