An empirical examination of the determinants of the shadow economy

Abstract

Using a statistical methodology guided only by data and based on a genetic algorithm, we select the best econometric model for explaining the determinants of the size of the shadow economy, its main determinants being: taxes on capital gains of individuals, corporate taxes on income, profits and capital gains, domestic credit, bank secrecy, ethnic fractionalization, urban population, globalization, corruption and the socialist legal origin of country

Analyzing the Drivers of the Shadow Economy for the Case of the CESEE Region

“…Finally, we identify the presence of a significant negative relation between UPG and SE which implies as the urban population increases, the shadow economy decreases. Our finding is in line with the existing literature (Elgin and Oyvat, 2013;Acosta-González, Fernández-Rodríguez and Sosvilla-Rivero, 2014).…”

Socio-Economic Inclusiveness And The Size Of Shadow Economy: A Cross-Country Analysis

“…While some studies focus on behavioural aspects of individuals majority of other researcher pay close attention on macro determinants of the shadow economy development and revealed significant effect of the various structural, socio-economic, political, legal, financial and overall institutional distortions and explain the moral justification of deviant profit-seeking behaviour of individuals as a by-product of poor control of corruption, rule of law, democracy, government effectiveness, regulatory quality, public goods quality, labour market regulations, financial development, fiscal quality, infrastructure, living-standards, income equality (Acosta-Gonzáleza et al, 2014;Berdiev & Saunoris, 2016;Charmes, 2012;Feld & Schneider, 2010;Herwartz et al, 2015;Johnson et al, 1997;Johnson et al, 1998b;Losby et al, 2002;Schneider, 2005;Schneider & Enste, 2000;Startien & Trimonis, 2010;Torgler & Schneider, 2009;Williams, 2004). Such imperfections in government policies create an exclusionary environment for individuals and businesses to obtain critical government benefits which are available for certain groups of population or could be accessed for further extra (bribes) payments (Guillermo & William, 2007).…”

Population in the shadow market: petty corruption and unpaid taxes

“…In particular, the economic causes and consequences of the shadow economy expansion and its inhibitory influence on civil economy development have been studied (Matsievsky, 2015;Saunoris, 2018). A number of studies have dealt with the nature of shadow financial flows and the factors related to their formation in a modern economy (Slepov & Chekmarev, 2016), the formation of a shadow economic activity subculture (Pokida & Zybunovskaya, 2017;Akhmeduev, 2015), and the financial content of shadow capital (Tanyushcheva, 2015;Acosta-González et al, 2014).…”

“…In recent years, researchers have increasingly begun to investigate a population's involvement in the shadow economy. This problem is especially urgent for countries with developing economies, and it primarily relates to the sphere of income tax non-payment on illegal (not registered legally) economic activity (Abdixhiku et al, 2018;Abdixhiku et al, 2017;Addison & Mueller, 2015). Studies on a population's involvement in the shadow economy are especially urgent in Russia, including all types of tax evasion, such as shadow payroll (Boikov, 2014;Volovskaya et al, 2016).…”