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Decomposing the Grey Economy in Bulgaria: A General-Equilibrium Analysis

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  • Vasilev, Aleksandar

Abstract

This paper attempts to assess the size of the grey economy, and provide a decomposition by evasion type. The modelling approach utilizes a standard micro- founded general-equilibrium setup, which is augmented with a revenue-extraction mechanism and a government sector. The model is calibrated to Bulgaria after the introduction of the currency board (1999-2018). A computational experiment performed within this setup estimates that on average, the size of total evasion is a bit more than one-fourth of output, an estimate which is in line with the figures provided in both Philip (2014) and the European Commission (2014). Two-thirds of the model- predicted evasion is a combined result of income- and social security evasion, while the rest is due to VAT evasion.

Suggested Citation

  • Vasilev, Aleksandar, 2022. "Decomposing the Grey Economy in Bulgaria: A General-Equilibrium Analysis," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 8(2), pages 7-23.
    • Handle: RePEc:zbw:espost:268778
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    References listed on IDEAS

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    More about this item

    Keywords

    tax evasion; general equilibrium;

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models

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