The links between corruption and the shadow economy have mostly been studied
empirically at the country level. This paper contributes to this literature by examining the
relationship at the sub-national level. Using World Bank Enterprise Survey data, we find
that sub-national units in which more firms report that corruption is an obstacle to their
operations also tend to have more firms that report informal competitors as an obstacle
and vice versa. We also ask whether within country variation matters and find that regions
with a bigger problem in one of these dimensions than their national average also tend to
have a relatively bigger problem in the other dimension. Sub-Saharan Africa is different in
that neither of these findings are evident in that sub-sample.