Explaining the Shadow Economy in Europe: Size, Causes and Policy Options

Kelmanson, Ben; Kirabaeva, Koralai; Medina, Leandro; Mircheva, Borislava; Weiss, Jason

doi:10.2139/ssrn.3523151

Cited by 51 publications

(49 citation statements)

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“… Source: Column a, b and c – Gyomai van Den ( 2014 ) Table 1 , p.6; Column d – Medina and Schneider ( 2018 ) Table A.1, p.69–76; Column e – Kelmanson et al. ( 2019 ) Appendix III., p.26; Column f – Schneider ( 2016 ) Table 2 , p.48 ( * In column g, the average is calculated as (d+e)/2 for Norway, and the value of d is taken for Canada, Israel, and Mexico) .…”

Section: Shadow Economy Measuresmentioning

confidence: 99%

Shadow economy: A comprehensive concept and the interpretation of its size

Tiszberger

2022

Int Social Sci J

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There is lack of standard understanding or definition of the shadow economy. The aim of this mainly theoretical paper is twofold. First it brings together the concepts of the available academic research and official statistics. Second it discusses in what sense the calculated shadow economy measures indicate an exceeding amount over the official Gross Domestic Product (GDP). Indicators usually express shadow economy size as a proportion of GDP, so it is of most importance to elucidate the true meaning of these numbers. Official GDP already includes certain part of the shadow activities. Empirical calculations illustrate the weight of overlap.

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Section: Shadow Economy Measuresmentioning

confidence: 99%

Shadow economy: A comprehensive concept and the interpretation of its size

Tiszberger

2022

Int Social Sci J

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“…According to and Kelmanson et al (2019), there are two broad approaches meant to explain the participation in the informal economy: (1) the involuntary participation perceived as the exclusion of individuals from state benefits and the formal labour market and (2) the voluntary decision of people to leave or exit the formal economy, in response to a burdensome state. While the exit approach is rather observed in developed countries, the exclusion perspective is a particularity of developing economies (Gërxhani, 2004;Oviedo et al, 2009).…”

Section: Literature Reviewmentioning

confidence: 99%

“…One of the most powerful determinants of the shadow economy is the regulatory burden (Kelmanson et al, 2019). A high level of regulation limits the freedom to participate in economic activities and is perceived as a barrier against market access as well as an incentive for tax fraud, and vice versa.…”

Section: Literature Reviewmentioning

confidence: 99%

Institutional drivers of shadow economy. Empirical evidence from CEE countries

Iacobuță-Mihăiță

Pintilescu

Clipa

et al. 2022

REM

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Crises, such as the current pandemic, and the measures meant to tackle with them tend to increase the presence of the informal sector in the official economy, affecting mostly the emerging and developing economies. This situation is characteristic for the eleven CEE countries. These also display certain weaknesses at the economic and institutional level, which increase their vulnerability in times of crisis, with a real danger for the informal economy to grow.This paper aims to investigate the role of the institutional framework in explaining shadow economy in the mentioned countries. The methodological approach consists in a panel analysis using data from the 1996-2017 period and a principal component analysis meant to identify the specificities of each country. Our results demonstrate the influence of both formal and informal institutions on the shadow economy while country-level particularities show that institutional factors act differently in different socio-economic and political environments; consequently, the measures aimed to limit shadow economy should be adapted to each country’s specific context.

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“…Stronger institutions are also associated with higher rates of R&D investment (Brown et al, 2017). The particular four Mediterranean countries have considerably large informal economies (vis-a-vis other euro area states) which are determined (among others) by the level of institutional and regulatory quality, as weak institutions, such as the lack of respect for the law or high levels of corruption, or low levels of government effectiveness, encourage informal activities (Kelmanson et al, 2019;Medina and Schneider, 2019) [7]. The size of the informal economy has a cost to innovation and productivity (Kelmanson et al, 2019).…”

Section: Introductionmentioning

confidence: 99%

“…, 2019; Medina and Schneider, 2019) [7]. The size of the informal economy has a cost to innovation and productivity (Kelmanson et al. , 2019).…”

Section: Introductionmentioning

confidence: 99%

The effect of institutions on R&D investment: the case of four mediterranean euro area states

Vlachos

2022

JAAR

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PurposeThis study investigates the impact of institutional factors on firms investing in R&D.Design/methodology/approachThe study uses data from the World Bank's Enterprise Surveys for the Republic of Cyprus, Greece, Italy and Portugal. A model with institutional factors as explanatory variables and firm performance factors as control variables is estimated with weighted least squares heteroscedasticity corrected regression. The reverse causality problem is addressed by using a two-stage least squares regression approach.FindingsThe findings indicate that institutional quality has a significant influence on firms' R&D expenditure. The results have several implications in relation to findings of previous research.Research limitations/implicationsThe inclusion of more countries that were affected by the European economic crisis will probably give more insights about the effect of institutional factors on R&D.Practical implicationsPolicy makers have to address short-comings in institutional quality, particularly in terms of the labor regulation burden. Policy makers should prioritize anti-corruption measures to foster an environment that would attract more R&D in the Republic of Cyprus and Greece.Originality/valueThis study contributes to the growing body of literature investigating the impact of institutional factors on R&D. It focuses on four developed European countries that bore the brunt of the European economic crisis and have to implement their recovery and resilience plans successfully, in order to recover from the effects of the COVID-19 pandemic on their economic activity.

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Explaining the Shadow Economy in Europe: Size, Causes and Policy Options

Cited by 51 publications

References 0 publications

Shadow economy: A comprehensive concept and the interpretation of its size

Shadow economy: A comprehensive concept and the interpretation of its size

Institutional drivers of shadow economy. Empirical evidence from CEE countries

The effect of institutions on R&D investment: the case of four mediterranean euro area states

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