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The underground economy, also known as the shadow economy, has been recognized for a long time and increasingly plays an important role in economies around the world, especially for developing countries like Vietnam. Over the past few years, the strong growth of the Vietnamese economy has recognized the development and significant contribution of informal economic activities. This study was conducted to evaluate the effects of globalization and economic openness on the size of the informal economy to fill the theoretical gap and proposed appropriate recommendations for policymakers. The research uses qualitative and quantitative analysis methods. We collected KOF Globalization Index from ETH Zurich - Swiss, the trade index from World Bank and the size of the underground economy in Vietnam from the research of Medina and Schneider (2018) for analyzing. The results show that the trade openness has a positive impact on the development of globalization in Vietnam. Also, the promotion of globalization plays a vital role in reducing the size of the underground economy in Vietnam. Several implications for policy makers has been proposed based on our findings.

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