This paper explores the relationship between the e-participation attitude of citizens and the size of the shadow economy, whose consequences could be detrimental to countries’ economic development. We exploit a rich panel dataset for 149 countries characterized by a large digital divide within their public sectors, different levels of both income and democratic institutions at work over years 2003–2015. Using the instrumental variables approach to address potential endogeneity issues, we find that e-participation significantly contributes to reducing the shadow economy. Due to its interactive nature for both businesses and citizens, it positively affects the individuals’ behavior against informal economic activities by creating a more collaborative environment between the government and its stakeholders.