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Determinants of Shadow Economy in Eastern European Countries

Author

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  • Mykolas Navickas
  • Vytautas JuÅ¡Ä ius
  • Valentinas Navickas

Abstract

In this article the relationship between shadow economy and its’ determinants has been examined. Ten Eastern countries from European Union were chosen due to specific particularities, which may cause higher shadow economy levels in the investigated countries compared with the EU average. Time span of 2003-2016 was selected, as 2017 data has yet to be released at the time of the analysis. Article consists of examination of the current situation and shadow economy trends in Eastern European countries; overview of shadow economy scientific literature followed by hypothesis, which are examined by constructing regression models. Models aim to distinguish the relationship between selected determinants and shadow economy size. Scientific literature analysis revealed that increase of tax burden on labor is seen as a primary reason for the increase of shadow economy, however, such relation has not been identified. Furthermore, results show that unemployment and self-employed people ratio affect shadow economy insignificantly. This suggests that further analysis is needed. Nonetheless, regression model has not rejected the hypotheses of corruption level, income inequality, business freedom and GDP per capita effect on shadow economy. Thus, it can be stated that these variables are determinants of shadow economy in Eastern European countries. JEL Codes - O11, O17, C12, G18

Suggested Citation

  • Mykolas Navickas & Vytautas JuÅ¡Ä ius & Valentinas Navickas, 2019. "Determinants of Shadow Economy in Eastern European Countries," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 66(1), pages 1-14, March.
    • Handle: RePEc:aic:saebjn:v:66:y:2019:i:1:p:1-14:n:126
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    References listed on IDEAS

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    Cited by:

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    2. Elham Taheri & Salih KatircioÄŸlu & Ayhan Tecel, 2024. "Gender Differences in the Impact of the Informal Economy on the Labor Market: Evidence From Middle Eastern Countries," Evaluation Review, , vol. 48(5), pages 865-892, October.
    3. Colin C. Williams, 2023. "A Modern Guide to the Informal Economy," Books, Edward Elgar Publishing, number 18668.

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    More about this item

    Keywords

    shadow economy; Eastern European countries; MIMIC methodology; tax burden; government regulation;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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