How the Inefficiency of Executive Bodies’ Performance Reflects the Size of Shadow Economy (The Case of the Russian Federation Regions)

Abstract

The article reveals how the size shadow economy interacts with the indicators of executive bodies' performance. The theoretical framework of the study is the set of research publications proved the impact of public institutions on the size of shadow economy. The empirical basis of the study is the evaluation of the shadow economy in the regions of the Russian Federation, made by the authors according to Russian Statistic Agency data. The authors study the statistical relationship between the size of the shadow economy in the regions of the Russian Federation and several indicators of the executive bodies performance. The sample consists of 1032 observations for the period from 2004 to 2016. The research methodology includes correlation analysis and cluster data analysis. There was found a negative relationship between the size of the shadow economy and the number of executive bodies' employees per 10,000 of the permanent population. It was found a positive relationship between the size of the shadow economy and the share of population with cash incomes below the subsistence minimum and the level of migration; a weak negative relationship with life expectancy at birth; no significant correlation with the level of unemployment. There were revealed notable tendencies in variables' values (across space and time), that effect on relationship between independent variables and the scale of the shadow economy across regions.