As can be seen, corruption increases with the size of the underground sector in the overall sample, with coefficients significant at the 10% level according to the OLS regression (column 1) and at the 5% level when using the two sets of instruments (columns 2 and 3). The disaggregated results show that the positive impact of the shadow economy on corruption is driven by low income countries, with a coefficient significant at least at the 10% level in all three regressions. The magnitude of the coefficient is economically relevant. In low income countries, a one percentage point increase in the shadow economy (in % of GDP) increases the index of corruption by between 0.06 and 0.12 points. While the Sargan test does not reject all but one specification at conventional levels of significance, note, though, that while the instruments are jointly significant at the 10% level a east in the overall and low income samples, the F-statistics on the instruments in the first stage regressions show that the instruments are rather weak.