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The Shadow Economy-An International Survey
Abstract
Illicit work, social security fraud, illegal employment, economic crime and other examples of shadow economy activities are becoming an ever increasing problem in countries around the world. Most governments try to reduce the shadow economy through punitive measures or through education, rather than through reforms of the tax and social security systems. Friedrich Schneider and Dominik H. Enste suggest a reform of state (public) institutions, which could improve the dynamics of the official economy. © Friedrich Schneider and Dominik H. Enste 2004 and Cambridge University Press, 2009.
... These exciting facts motivate youngsters to take up jobs in this area compared to the traditional ones. Some literature illustrates the reasons that individuals of different age groups take up jobs in the gig economy due to a lack of opportunities (Schneider & Enste, 2013), incapability (Brown, 2017) and incompetence in finding full-time conventional jobs (CIPD, 2017). Incapability could be better communication or interpersonal skills (Sinek,2016). ...
... However, it is not related to the non-availability of alternative jobs. The study conducted in other places (e.g.:- (Schneider &Enste, 2013 andCIPD, 2017) shows that attraction to gig jobs is due to unavailability or the difficulty of getting conventional full-time jobs. However, that is not in agreement with this study. ...
... However, it is not related to the non-availability of alternative jobs. The study conducted in other places (e.g.:- (Schneider &Enste, 2013 andCIPD, 2017) shows that attraction to gig jobs is due to unavailability or the difficulty of getting conventional full-time jobs. However, that is not in agreement with this study. ...
59 attract gig workers. Gig jobs are an opportunity to earn more with flexibility. Hence, gig jobs have become a boon for many individuals.
... The informal economy presents a complex paradox. On the one hand, it is distinguished by its entrepreneurship, flexibility, and resilience, often surpassing the formal economy in terms of innovation, resource efficiency, and robustness (Schneider & Enste, 2002;Gurtoo & Williams, 2009;Williams & Nadin, 2010;Dima et al., 2022;Călinescu, 2023). This sector fuels economic growth by creating new markets, enhancing entrepreneurship, and expanding financial access while also acting as a social safety net by providing employment for those who are jobless, thus helping to alleviate poverty and reduce inequality (Asea, 2005;Galli & Kucera, 2003;Chen, 2019). ...
... On the other hand, the underground economy is distinguished by low salaries, detrimental workplace conditions, and the absence of benefits related to social security (Farzanegan & Hassan, 2017). It competes with the formal economy for resources, depleting state funds, distorting official statistics, and encouraging unfair competition with formal firms (Schneider & Enste, 2002;Gerxhani, 2004;La Porta & Schleifer, 2014;Dell'Anno, 2016;Dell'Anno et al., 2020). Based on the standpoint of the environment, it causes increasing pollution and difficulties in managing the rise of the export market (Biswass et al., 2003;Bacchetta et al., 2012). ...
... Our findings show that the shadow economy has a negative influence on both the LNOB and SDG indices across Europe, emphasizing the need for strict measures to reduce informal economic activities. This is consistent with the findings of Schneider and Enste (2002) and Medina and Schneider (2018), who both report detrimental repercussions of the shadow economy for economic performance and social development. ...
The informal economy, often characterized by unregulated and untaxed economic activities, has significant yet understudied implications for sustainable development and inclusivity. This paper explores the influence of the size of the shadow economy and undeclared work patterns (envelope wage, without a formal contract and bogus self-employed) on the Leave No One Behind Index and the Sustainable Development Index developed by the United Nations across European countries from 2000 to 2021. Employing panel data regression models, the research investigates the differential impacts of informality on these indices, revealing a negative correlation with the informal economy and a positive association with various forms of undeclared work. The analysis, comprising 18 models segmented by region – Central and Eastern Europe, Western Europe, and Europe – demonstrates that the adverse effects of the informal economy are more pronounced, whereas the positive contributions of undeclared work patterns are subtler, yet significant. The study’s findings suggest a complex interaction between informal economic activities and sustainable development goals, challenging the conventional perspective on informality and its role in inclusive development. The results indicate that while the shadow economy may hinder broad development efforts, informal labor arrangements support vulnerable populations, underscoring the need for nuanced policy interventions that recognize the multifaceted nature of work and its impacts on development.
... These exciting facts motivate youngsters to take up jobs in this area compared to the traditional ones. Some literature illustrates the reasons that individuals of different age groups take up jobs in the gig economy due to a lack of opportunities (Schneider & Enste, 2013), incapability (Brown, 2017) and incompetence in finding full-time conventional jobs (CIPD, 2017). Incapability could be better communication or interpersonal skills (Sinek,2016). ...
... However, it is not related to the non-availability of alternative jobs. The study conducted in other places (e.g.:- (Schneider &Enste, 2013 andCIPD, 2017) shows that attraction to gig jobs is due to unavailability or the difficulty of getting conventional full-time jobs. However, that is not in agreement with this study. ...
... However, it is not related to the non-availability of alternative jobs. The study conducted in other places (e.g.:- (Schneider &Enste, 2013 andCIPD, 2017) shows that attraction to gig jobs is due to unavailability or the difficulty of getting conventional full-time jobs. However, that is not in agreement with this study. ...
59 attract gig workers. Gig jobs are an opportunity to earn more with flexibility. Hence, gig jobs have become a boon for many individuals.
... Though inherently challenging to study, various papers have advanced our understanding of the informal economy and estimated its average size to be 17.2% of developed nations' GDP (Schneider and Enste, 2013;Williams, 2016). Larger informal economies are generally associated with underdevelopment, greater corruption as well as lower human development index and economic growth (Williams, 2016;OECD, 2019). ...
... Yet, the received literature on disruptive innovation does not account for disruptive firms originating in the informal economy. Investigating the informal economy requires a careful definition of the term as it may encompass various degrees and forms of illegality, from tax evasion to purposefully breaking safety or environmental regulations (Schneider and Enste, 2013;Salvi et al., 2022). In this paper, we refer to the informal economy as the aggregation of firms that carry out illicit works, thus breaking away from formal institutions (Castells and Portes, 1989;De Castro et al., 2014), but which are considered legitimate by substantial groups of consumers (Webb et al., 2009). ...
... By analyzing how informal firms generate disruptive innovations, we highlight the differences from the classic cases of disruption studied in formal economy contexts (see Table 1). This is crucial because the informal economy represents on average 17.2% of the developed economies' GDP (Schneider and Enste, 2013;Williams, 2016) and up to 65% of less developed economies (Medina et al., 2017), and is typically associated with lower entrepreneurship productivity (Fredström et al., 2021) and human and economic development (Williams, 2016;OECD, 2019). Scholars have urged to investigate this sector and its influence over innovation practices (Choi and Perez, 2007;Gao and McDonald, 2022) to improve our understanding of different contexts (Salvi et al., 2022). ...
What are the implications of disruption originating in firms using illegal practices, which we refer to as informal firms? Since its development by Clayton Christensen, there has been increasing interest in disruptive innovation theory among innovation and management scholars. Yet, the disruptive power of informal firms remains understudied. We theorize informal disruption, which we define as the process through which entrepreneurs engage in business model innovation based on new technology and avoidance of regulation. Institutional voids and institutional incongruence facilitate scaling of such new business models. We offer a process model of informal disruption emphasizing business model formalization as a key strategy for informal disruptors and non‐market strategies such as collective lobbying and consumer education as incumbent strategies when competing with informal disruptors. Our process model highlights the role of formal and informal institutions during informal disruption, which can both facilitate informal disruptors' scaling and limit incumbents' adaptation strategies. We discuss the implications of studying informal disruption for disruptive innovation, business model, and informal economy research.
... The formal sector is slow to achieve significant growth in this context, while the contribution of the informal sector and its expansion are increasingly being observed. Indeed, the informal sector accounts for over 70% of GDP in developing countries, while the formal sector barely exceeds 30% [1]. According to [2] and [3], the informal sector replaces the formal sector because the latter is unable to recruit the entire existing workforce. ...
... Another group is employees, which includes full-time, part-time or temporary salaried workers, casual and contract workers, undeclared employees, homeworkers and others. Temporary and part-time workers are much more likely to be employed in the informal sector than those in permanent full-time jobs (see Fig. 1 in appendix for share of informal employment in total employment) 1 . Overall, men are more likely than women to work under this type of arrangement. ...
... Similarly, for every 1 percent of bad regulation, 5.34 percent of entrepreneurs fail to enter the FS. In fact, red tape, lengthy registration procedures, high startup costs and a large number of procedures are barriers that discourage the expansion of formal (1) to (6) are estimated models with different institutional indicators entrepreneurship in developing countries. This result is in line with that of [60], for whom poorquality institutions constitute a blockade to entrepreneurship. ...
To effectively combat poverty worldwide, many development policies place particular emphasis on entrepreneurship, thanks to its ability to drive economic growth. However, there is the challenge of reducing the informal sector and promoting the formal sector. Many initiatives have therefore, been undertaken to promote formal entrepreneurship in developing countries, but little is known about the role of institutions and financial development. The aim of this article is to analyze the effects of financial development and institutions on formal entrepreneurship in developing countries. To achieve this, the system GMM method was applied to a sample of 94 developing countries between 2006 and 2018. It yielded the following results: financial development has a positive effect on formal entrepreneurship; institutions have mixed effects on formal entrepreneurship; institutions encourage financial development to foster formal entrepreneurship; and, other macroeconomic magnitudess have mixed effects. The study recommends that the leaders of these countries develop their financial systems, fight corruption more effectively, reduce regulatory constraints on business start-ups and encourage the achievement of economic policy objectives, in order to expand the size of the formal sector.
... Також в Україні продовжує діяти схема ухилення від оподаткування та виведення валюти за кордон, відома як схема «чорного зерна» [9]. Ця схема передбачає закупівлю нелегально зібраного зерна у фермерів за готівку без належного обліку. ...
... Законодавча база України забезпечує ефективні механізми протидії корупції, проте важливим є належне впровадження цих механізмів на практиці. [7], [8], [9]. ...
... Many scientific controversies and political discussions arise because of different or unsatisfactory definitions of the shadow economy. It is necessary to clarify the term in each context (Schneider & Enste, 2013). "Shadow economy" includes all economic activities not recorded in official statistics and therefore are not touched by government regulations and tax obligations (Evers & Korff, 2002). ...
... "Shadow economy" includes all economic activities not recorded in official statistics and therefore are not touched by government regulations and tax obligations (Evers & Korff, 2002). Such as 'soft' illicit activities ('moonlighting'), illegal work and social deception, and criminal economic activities (Schneider & Enste, 2013). There are several contrasting explanations for the shadow economy (Marcelliis et al., 2010;Williams, 2014). ...
This study tends to focus on how shadow economy and trade openness influence tax revenue in the Sub-Saharan Africa (SSA). The study used four SSA countries to test this relationship from 1991 to 2017. The study employs pool OLS with robust standard error to address the potential threat of heteroscedasticity. The result from this estimation indicate that shadow economy diminished the amount of tax revenue generated by these countries. Thus, the study recommends that appropriate measures should be put in place to curtail the size of the shadow economy because of its detrimental effects on tax revenue.
... Goods and services produced, in some cases, may be at affordable prices in the shadow economy due to cost advantages (by escaping taxes and regulatory burdens). Thus, individuals living in energy poverty can easily patronize the informal sector and save part of the little income they earn or receive from the government in terms of aids or transfer payment (Schneider and Enste, 2013;Karekezi et al., 2018). Poor households and young entrepreneurs participate in the shadow sector so as to circumvent the business regulations imposed in the formal economy (Berdiev et al., 2020). ...
... Lack of access to basic needs in the formal sector drive many households to shadow economy segments. This is because shadow goods and services are cheaper to access due to the absence of taxation and regulations (Schneider and Enste, 2013). Energy could be very cheap to access in the shadow economy, especially when the poor cannot afford the rate at the official economy. ...
Purpose
Energy poverty is a global phenomenon, but its prevalence is enormous in most African countries, with a potential impact on quality of life. This study aims to investigate the impact of energy poverty on the shadow economy.
Design/methodology/approach
The study uses panel data from 45 countries in Africa over a period of 1996–2018. Using panel cointegrating regression and panel vector auto-regression model in the generalized method of moments technique.
Findings
This study provides that energy poverty deepens the size of the shadow economy in Africa. It also documents that there is a bidirectional causality between shadow economy and energy poverty. Therefore, the two variables can predict each other.
Practical implications
The study suggests that lack of access to clean and modern energy services contributes to the depth of the shadow economy in Africa. African authorities are advised to strengthen rural and urban electrification initiatives by providing adequate energy infrastructure so as to reduce the level of energy poverty in the region. To ensure energy sustainability delivery, the study proposes that the creation of national and local capacities would be the most effective manner to guarantee energy accessibility and affordability. Also, priorities should be given to the local capital mobilization and energy subsidies for the energy poor. Energy literacy may also contribute to the sustainability and the usage of modern energy sources in Africa.
Originality/value
Previous studies reveal that income inequality contributes to the large size of shadow economy in developing economies. However, none of these studies analyzed the role of energy poverty and its implications for underground economic operations. Inadequate access to modern energy sources is likely to deepen the prevalence of informality in developing nations. Based on this, this study provides fresh evidence on the implications of energy deprivation on the shadow economy in Africa using a heterogeneous panel econometric framework. The study contributes to the literature by advocating that the provision of affordable modern energy sources for rural and urban settlements, and the creation of good energy infrastructure for the firms in the formal economy would not only improve the quality of life but also important to discourage underground economic operations in developing economies.
... A complex relationship exists between informality and institutional quality. On the one hand, informality can result from weak institutions and poor governance, as businesses may turn to informality to avoid burdensome regulations and taxes (Dabla-Norris, Gradstein, and Inchauste 2008;Loayza, Serven, and Sugawara 2009;Schneider and Enste 2013). On the other hand, informality can also undermine institutional quality, as it can lead to a lack of protection for workers and consumers, reduce the tax base, and create barriers to economic growth and development (Elgin and Oztunali 2014;Schneider and Enste 2000). ...
... Formality can provide benefits such as contract enforcement and market access. However, burdensome regulations and fees incentivize informality when legal frameworks are onerous and state monitoring is limited (Almenar, Sánchez, and Sapena 2020;Dabla-Norris, Gradstein, and Inchauste 2008;Loayza, Serven, and Sugawara 2009;Schneider and Enste 2013;Simonović and Bošković 2016). High informality can result from weak institutions, as firms avoid burden and enforcement. ...
This study explores the link between informality and institutional quality in 48 emerging economies from 2013 to 2018, using partial least squares-structural equation modeling (PLS-SEM). It delves into the role of informality and the poorly understood drivers in these economies. This study models property rights, public fund diversion, and government transparency. This study explores systemic conditions and finds a complex link between weaker institutions and increased informality. The analysis found an association between lower institutional quality and higher levels of informality, aligning with the theory that more robust institutions are linked to fewer informal activities. However, the analysis also indicated that systemic factors have a significant relationship with the degree of informality. Mediation analysis indicated an association between systemic issues, reduced institutional quality, and increased informality. State legitimacy, inequality, and factionalism have been highlighted as potential areas to address in an effort to decrease informality. Enhancing systemic conditions and public fund oversight may be important considerations. A dual approach to institutional and systemic reforms has been suggested. Regional differences indicate a need for further research on context-specific drivers. This exploratory PLS-SEM study offers detailed evidence to aid formalization policies in emerging economies. ARTICLE HISTORY
... In some way, it enables them to launch viable but informal micro-enterprises to satisfy unmet customers' economic needs (Chen and Carré, 2020;Gold, 2019). Scholarly research on entrepreneurship and economic development notes the widespread presence of informal business activity in the economies of many developing countries (see Saunoris and Sajny, 2017;Schneider and Enste, 2013) as well as industrialized countries (Corradini, 2020;Williams and Martinez, 2014). Despite the informality of their activities, these types of enterprises perform an essential economic function in which they produce legal goods and services (Bruton et al., 2012;ILO, 2002;Nichter and Goldmark, 2009), create job opportunities (Desta, 2018) and sustain livelihoods (Chen and Carré, 2020). ...
... With economic development and modernization, in the advanced world, the authors believe such transformations provide a natural and inevitable diminution of informal entrepreneurship. Notably though, since the turn of the new millennium, scholarly works (e.g., Schneider and Enste, 2013;Thai and Turkina, 2014) started to recognize that the informal sector in general, and informal entrepreneurship in particular (Gold, 2019;Ramadani et al., 2019), is extensive, enduring and expanding in global regions (Chen and Carré, 2020). ...
Although informal entrepreneurship has attracted attention from entrepreneurship scholars, it remains under-theorized. This systematic review critically analyses, evaluates and integrates data on informal entrepreneurship gathered from studies published in eight (8) leading entrepreneurship journals. Although this form of entrepreneurship is practiced across the globe, it is generally perceived as an activity occurring in the peripheries of mainstream economics and inferior to formal entrepreneurship. This review develops essential knowledge for entrepreneurship research by theorizing informal entrepreneurship as a potent process in business formation and it establishes a future research agenda.
... The most commonly used measurement method is the method based on a combination of multiple indicators and multiple causes (MIMIC) method (Schneider 1994a(Schneider , 1994b(Schneider , 2005(Schneider , 2011Feld and Schneider, 2010;Schneider and Enste, 2002). ...
When it comes to tax loss, the first concept that is considered is the informal economy. Informal employment, which is seen as a reflection of the informal economy on working life, is the non-reporting or under-reporting of employees to the relevant public institutions. Informal employment is an important socioeconomic problem in our country. Tax loss occurs due to the rapid aging of the population and the effect of social security deficits. Since tax is the main and most important source of income for the state, the importance of informal employment has been understood more recently. In our country, unemployment, the structure of employment, labor force participation rate, labor supply and demand, informal employment and the informal economy it causes are issues that affect each other and need to be resolved. In our country, the rates of informal employment and the informal economy are high, and efforts to reduce them are continuing. The concept of informal employment in our country emerged with the increase in the efficiency of the private sector on the economy after the 1980s, when liberalization policies gained momentum, and it continues today. In this study, the concepts that cause unregistered employment are explained and the informal economy and unregistered employment rates in 2003 and after are examined and their effects on tax loss are examined. In our country, the informal economy rates are around 26-31%. Informal employment rates decreased from 51% to 30%. The tax loss created by informal employment consists of estimated values. Considering the high rates of informal economy and unregistered employment, it is possible to say that the tax loss is serious. For this reason, it is necessary to increase the efforts to reduce the informal economy and informal employment.
... Furthermore, the broader economic consequences of AML measures are significant, particularly for developing nations. By blocking illicit funds that could otherwise be invested in domestic economies, AML policies contribute to a cycle of dependency in which developing countries must rely on foreign investments, currency reserves, and international aid (Schneider and Enste, 2013). These nations, while being denied access to potentially transformative financial resources from illicit markets, remain dependent on the financial systems controlled by Western powers. ...
Purpose: This article examines the hypothesis that Anti-Money Laundering (AML) measures, while positioned as safeguards against financial crime, also serve as hidden mechanisms for superpower nations to control the economies of other countries and ensure their own financial dominance. Methodology: This study employs a methodology grounded in existing literature and qualitative analysis, complemented by economic data, to examine the role of Anti-Money Laundering (AML) measures in regulating the flow of illicit earnings from activities such as drug trafficking and organized crime. Findings: The implementation of AML measures, mandated globally by international regulators, is presented as a safeguard for the financial domain. However, this study uncovers a hidden agenda: controlling the inflows and outflows of superpower nations' currencies to maintain continuous financial dominance and exert control over other countries, reinforcing global economic hierarchies. Limitations: Data limitations arise from the clandestine nature of illicit flows and indirect evidence on geopolitical motives. Implications: The study highlights AML's dual role as both a crime-control mechanism and an instrument of economic influence, calling for a critical re-evaluation of AML policy motives. Originality: By linking AML frameworks to currency stability and geopolitical strategy, this article reveals an underlying power dynamic within international financial regulation. Introduction:
... Yapay zeka ve veri analitiği sistemleri kullanılarak, bu süreci hızlandırarak beyan edilen gelirlerle gerçek ödenen ücretler arasındaki farkları tespit edebilir. Özellikle Avrupa ülkelerinde bu tür sistemler etkin bir şekilde kullanılmakta ve maliye politikalarına entegrasyonu sağlanmaktadır (Schneider, 2013). Meslek grupları itibariyle bildirilebilecek asgari prime esas kazanç tutarları belirlenmelidir. ...
Esen, B. (2024) “Makroekonomik İstikrar Açısından Kritik Önemde Bir Unsur Olarak Türk Sosyal Güvenlik Sisteminin Sürdürülebilirliği ve Reforma İlişkin Öneriler”, Stratejist Dergisi, 1(1), Aralık 2024, 50-65.
Öz: Bir ülkede genel olarak refah sistemlerinin özel olarak ise sosyal güvenlik sisteminin sürdürülebilir dengede olması, o ülkenin işgücü piyasası ve sosyal dengeleri açısından olduğu kadar makroekonomik dengeleri açısından kritik önemdedir. Nüfusun yaşlanması, işgücü piyasasındaki değişimler, sosyal yapının dönüşümü, geleneksel aile sisteminin dağılması, küreselleşme, göç ve küresel insan hareketliliği ve ekonomik merkezin doğuya kayması gibi yapısal dönüşümlerle birlikte, sosyal güvenlik sistemlerinin sürdürülebilirliği, etkinliği ve makroekonomik dengeler üzerindeki etkileri son yıllarda küresel ölçekte daha fazla tartışma konusu olmaktadır.
Bu bağlamda, 2000’li yıllarda refah devleti alanında önemli atılımlar yapmış ve Türk Refah Modeli denilebilecek kendine has bir refah sistemi kurmayı başarmış olan Türkiye’nin sosyal güvenlik sisteminin sürdürülebilirliği de son yıllarda sorgulanmaya başlamıştır. Gerek kapsamı oldukça geniş ve cömert olan sistemin etkinlik-etkililik yönüyle analizi, gerek iş piyasalarındaki dönüşümlerin etkilerinin sisteme yansıtılması ihtiyacı, gerekse de Türkiye’nin içerisinden geçtiği sosyodemografik dönüşüm ve sosyolojik değişim nedeniyle Türk Sosyal Güvenlik Sistemi’nin mali ve idari açıdan yeterliliği ve sürdürülebilirliğine ilişkin kaygıların arttığı görülmektedir. Türk Sosyal Güvenlik Sistemi’nin mali ve idari sürdürülebilirliğini sağlamak Türkiye’nin mevcut makroekonomik istikrar arayışı açısından kritik önemdedir.
Bu makalede öncelikle sosyal güvenlik ve makroekonomik istikrar ilişkisine ilişkin literatür temel unsurlarıyla incelenmiş, sonrasında Türkiye’de son yirmi yılda sosyal güvenlik sisteminin gelişimi ana unsurlarıyla özetlenmiş, devamında ise Türk Sosyal Güvenlik Sisteminin son dönemlerdeki mali ve idari sürdürebilirliği farklı boyutlarıyla tartışılmıştır. Nihayetinde ise sosyal güvenlik sistemine ilişkin reform için politika önerileri makroekonomik istikrar ve bütçe dengesi bağlamında analiz edilmiştir.
Esasen, mali açıdan sürdürülebilir, idari olarak etkili, hizmet kalitesi ve kullanıcı memnuniyeti yüksek bir sosyal güvenlik sisteminin Türkiye için milli çıkar niteliğinde bir ihtiyaç olduğu görülmektedir. Türkiye’nin içerisinde geçtiği makroekonomik istikrar programının başarısı için Sosyal Güvenlik Sisteminin mali yapısının güçlendirilmesi, sosyal güvenlik açığının sürdürülebilir dengeye oturtulması ve sistemin yüksek sosyal refahı üretecek şekilde etkinlik/etkililik esaslı bir çerçeveye oturtulması ihtiyacı bulunmaktadır.
Anahtar Kelimeler: Makroekonomik istikrar, bütçe disiplini, Sosyal Güvenlik Bütçesi, SGK, refah devleti, maliye politikası, Türk Sosyal Güvenlik Sistemi, kamu politikalarında sürdürülebilirlik.
Abstract: In a country, the sustainability of welfare systems in general and social security system in particular is of critical importance in terms of the labour market and social balances of that country as well as in terms of its macroeconomic balances. Along with structural transformations such as aging population, changes in the labour market, transformation of the social structures, disintegration of the traditional family, globalisation, migration and global human mobility and shift of economic centre towards the east, the sustainability and effectiveness of social security systems, as well as their impacts over macroeconomic balances have become increasingly discussed on a global scale in the recent years.
In this context, the sustainability of the Turkish Social Security System, as a country which has made significant strides in the field of welfare state in the last two decades and has managed to establish a unique welfare system that can be called the Turkish Welfare Model, has also begun to be scrutinised in the recent years. It is observed that concerns about the financial and administrative adequacy and sustainability of the Turkish Social Security System have increased due to the need to analyse the system, which is quite broad and generous in scope, the need to reflect the effects of the transformation in labour markets, and the sociodemographic transformation and sociological change that Türkiye is going through. Ensuring the financial and administrative sustainability of the system is of critical importance to Türkiye’s current quest for macroeconomic stability.
In this study, firstly, the literature on the relationship between social security and macroeconomic stability is examined in general, then the development of the social security system in Türkiye in the last twenty years is summarized with its main elements, and then the financial and administrative sustainability of the Turkish Social Security System in recent periods is scrutinised with different aspects. In the last section, the reform policy proposals regarding the Turkish Social Security System are scrutinised in terms of macroeconomic stability and budgetary balance.
Essentially, it is seen that a social security system that is financially sustainable, administratively effective, with high service quality and user satisfaction is an issue of national interest for Türkiye. In order for Türkiye to succeed in the macroeconomic stability program that it is going through, there is a need to strengthen the financial structure of the Social Security System, to establish a sustainable balance in the social security deficit, and to establish the system in a framework based on efficiency/effectiveness in a way that will produce high social welfare.
Keywords: Macroeconomic stability, budget discipline, Social Security Budget, SSI, welfare state, fiscal policy, Turkish Social Security System, sustainability in public policies.
... This is because it can lead to notable broad-scale losses in economic efficiency, such as diminished capital and labour productivity, increased income inequality and poverty, and significant microeconomic distortions like competition and sectoral capital allocation. Particularly, while the SE can provide opportunities for marginalised individuals and contribute to economic resilience, it poses challenges that can hinder the attainment of inclusive growth, such as lost tax revenue, reduced transparency and trust erosion, labour market distortions, social exclusion, and crime (Schneider and Enste 2013;Williams and Schneider 2016). ...
This study investigated the impact of mobile financial services on the shadow economy in Southern Africa countries and explored how regulatory quality moderates this relationship. Utilising panel data from 1993 to 2022, this study employed dynamic common-correlated effect (DCCE) and dynamic seemingly unrelated regression (DSUR) methods to assess long-run effects. The findings reveal that increased mobile financial services adoption markedly diminishes the scale of the underground economy by enhancing transaction transparency and accessibility, thus drawing more participants into the formal economy. The results are consistent across DCCE and DSUR estimations. Additionally, improvements in regulatory quality further diminish the shadow economy by bolstering trust and compliance within the financial system, suggesting that well-crafted regulations enhance the effectiveness of mobile financial services. Economic and financial sector developments also contribute to a reduced shadow economy, indicating that broader economic growth and advanced financial systems facilitate formal sector participation. Conversely, larger public sector expenditures appear to expand the shadow economy enterprises, likely due to inefficient resource allocation and increased fiscal burdens that push economic activities underground. Policy recommendations include the need to expand mobile financial services infrastructure, enhance financial literacy, and optimise financial regulatory frameworks to balance oversight with innovation encouragement.
... This modernisation perspective led to the view that IW existed as part of an underdeveloped and archaic economic environment (Williams and Windebank, 2006) that would disappear due to development and modern-capitalist growth (Portes and Sassen-Koob, 1987). Despite this assumption, IW continues to exist and has expanded in many contexts (Schneider and Enste, 2013). For instance, Clark and Colling (2019) and Clark et al. (2022) showcase the growth of IW in car washes within the UK, a developed economic setting. ...
This article develops a micro-level understanding of informal work (IW) by exploring the legitimising factors which business owners exercise to provide the rationale for engaging in IW. Using the lens of nudge theory, originating from behavioural economics, we show how IW becomes legitimised through nudging. Empirically, we explore the lived experience of service sector business owners who engage in IW practices in the East Midlands, UK. The findings uncover how the business owners’ context is shaped through exposure to various IW arrangements early in their working life; we also reveal a range of actors who actively shape these arrangements for embracing IW while delegitimising formal work. We present the factors that condition the beliefs and embed the understanding that IW is legitimate for the individual business owners, thus highlighting an important and emergent context for future studies in the realm of IW.
... They have generally found a substantial positive correlation between crime rates and economic deprivation as it creates social-strain and social-disorganization (Kornhauser, 1978): in regions where poverty and disadvantaged economic conditions are more diffuse, it is likely that crime perception is conceived less negatively, and the incidence of environmental criminal activities is higher. Following Schneider and Enste (2013), and as in Chiarini and Marzano (2004), we use the rate of irregular workers as a measure of territorial shadow economy. Theoretically, the relationship between environmental crime and shadow economy can be, a priori, ambiguous, given that the shadow economy may either lead to a decrease of environmental crime due to a structural shift from the formal sector to the informal/illegal sector (the reality is of course that environmental crime does not reduce, it is just no longer detected or reported), or to an increase of environmental crime due to the fact that they both are, in a sense, alternatives to the legitimate economy and, thus, a larger underground sector may correlate with higher environmental criminal activities (capturing illegal activities for purposes of financial gains). ...
This paper investigates the effect of legal deterrence (sticks) and economic conditions (carrots) on environmental crime in Italy. We have a unique dataset of environmental crime related to illegal wastewater and waste activities across regions for the decade 2006–2016. Considering that, albeit scant, a first recent literature on environmental crimes in Italy has already begun to study the relationship between economic growth, socio-economic variables, and environmental crime, our analysis is committed to explore the extent to which enforcement and deterrence variables can have an impact on the phenomenon under observation. Consistent with the law and economics literature, our empirical findings show evidence that both economic conditions and enforcement efforts may be effective tools for the fight against environmental crime and, thus, support policy makers to better target environmental crime-control policies in Italy.
... Russo and Musolino [41] reported that traders find it easier to navigate through routes that are having a favourable climate to easily allow them smooth passage. Additionally, a study by Schneider and Enste [42] established that cost of using a route negatively and significantly affect route choice decisions by traders. ...
Choice of trade route and destination by cross border traders is an important decision in today’s increasingly cross border trade of products including fish. The current study examined the geographical factors influencing choice of informal trade route and destination by fish traders. Both qualitative and quantitative approaches were adopted for the study. These included semi-structured questionnaires through personal interviews and key informant interviews with fish border inspectors. Data was analyzed through various techniques for trader’s choice and destination. Specifically, principal component analysis and spearman correlation, and Huff’s gravity model were used to identify significant factors influencing choice of trade route and destination, and market attractiveness, respectively. Fish traders bypass official border posts using informal routes connecting the main route before and after the border post. Despite attempts and awareness about formal trade, stringent regulations forced fish traders to use informal trade routes. However, investigations into choice of trade routes and destination found that route distance, presence of alternative destination, mode of transport, demand of the fish product, and personal safety and risks were the factors influencing choice of both trade route and destination by informal fish traders. This geographic analysis provides a basis for addressing challenges in informal cross border trade in Malawi. It is recommended that strategic efforts and investments should be made in the development of transportation infrastructure, such as roads and railways to improve connectivity between secondary routes and one stop border post. The government should also intensify awareness initiatives on COMESA simplified trade regime (STR) to encourage informal traders to transition to the formal sector through use of formal routes.
... Certain business types are more prone to non-compliance than others, such as in the building, renovating, and repairs sector (Chan et al., 2021). Schneider and Enste (2002) argued that the building, renovation, and repairs sector is responsible for 50% of illicit work. Moreover, non-compliance opportunities in the form of revenue concealment and overstating of deductions are considered to be the highest among small business owners (Ahmed & Braithwaite, 2005;Joulfaian & Rider, 1998). ...
... Third, the economy as the whole loses the possibilities of development because of shortage of income. Shadow economy is a very problematic area within European National Accounts (Schneider, 2013). ...
... The informal sector often emerges as a cost-minimization strategy. Schneider and Enste (2002) found the shadow economy can constitute a significant portion of GDP in both advanced and emerging economies. Informal networks help businesses avoid high compliance costs associated with formal regulations, taxes, and bureaucratic procedures (De Soto, 2000;Lagos & Schady, 2015). ...
This study investigates how businesses in emerging economies strategically use informal networks to navigate regulatory and market challenges. Through a comprehensive literature review and case studies from Uganda, Nigeria, and India, the research highlights the dual role of informal networks in both economic and social dimensions. These networks are essential for overcoming bureaucratic hurdles, accessing resources, and managing risks where formal institutions are often inadequate. The study introduces a dual-framework theory emphasizing the cost-saving and relational benefits of these networks. It also explores the behavioural factors-such as trust, relational capital, and social norms-that sustain these networks' effectiveness. Sectoral differences in the reliance on informal networks are analyzed, with a focus on agriculture, manufacturing, construction, retail, and services. The paper concludes by discussing policy implications and suggests ways to integrate informal practices into the formal economy while retaining their adaptive benefits. Future research directions are also proposed to better align informal networks with formal structures for sustainable growth in emerging markets.
... Although Tanzi's (1983) method stood out for its robustness, it was criticized by Schneider and Enste (2002) who argued that Tanzi assumes a base year for which there is no shadow economy without enlisting reasonable grounds for doing. Hence, there is more to tax evasion than the size of tax rates (i.e., tax morality, trust in the government, etc.). ...
This paper tracks the financial growth in Tunisia over the period 1984-2016 with a special focus on the shadow economy. Using Tanzi's measures, we worked on a nonlinear autoregressive distributed lag (NARDL) model to test the impact of the informal economy. The results suggest that the long-run effect of the financial growth becomes negative if there is a positive change in the shadow economy and the opposite holds. While changes in the shadow economy have no significant influence on the links between financial development and economic growth in the short run, they play a significant role in the Tunisian economy in the long run. K E Y W O R D S asymmetry, finance-growth, nonlinear ARDL, shadow economy
... We argue that 'Illicit Trade' (Scalia, 2017) which involves legal and illegal aspects plays a significant part in IRE crimes committed via complex 'Shadow Infrastructure' (Gallagher and Foster, 2021) which spans both legitimate and criminal networks, operating in 'Shadow Economies; (Schneider and Enste, 2013). Nevertheless, illicit economies pose socio-economic threats to the stability of nation States, are highly complex and unseen in nature (Felbab-Brown 2017:3) and because they generate both positive and negative consequences they can influence local and national GDPs. ...
Purpose
This study builds on the extant research of the authors on illegal rural enterprise (IRE). However, instead of taking a single or micro case approach within specific sections of the farming and food industries we examine the concept holistically from a macro case perspective. Many IRE crimes simply could not be committed without insider knowledge and complicity, making it essential to appreciate this when researching or investigating such crimes.
Design/methodology/approach
Using data from published studies, we introduce the theoretical concept of “Shadow infrastructure” to analyse and explain the prevalence and endurance of such criminal enterprises. Using a multiple case approach, we examine data across the cases to provide an analysis of several industry wide crimes—the illicit halal meat trade; the theft of sheep; the theft of tractors and plant; and the supply of illicit veterinary medicines.
Findings
We examine IRE crimes across various sectors to identify commonalities in practice and in relation to business models drawing from a multidisciplinary literature spanning business and criminology. Such enterprises can be are inter-linked. We also provide suggestions on investigating such structures.
Practical implications
We identify academic and practical implications in relation to the investigation of IRE crime and from an academic perspective in relation to researching the phenomenon.
Originality/value
This study combines data from numerous individual studies from a macro perspective to provide practical solutions to a multifaceted problem.
... It is conceivable that the context influences whether behaviors are perceived as ethical (Schneider & Enste, 2013). In the Western Balkan economies, building social capital through exchanging favors for preferential treatment is common (Džunić & Golubović, 2016). ...
PURPOSE: The entrepreneurship-ethics nexus draws considerable interest from researchers and practitioners with little resolution. Our purpose with this paper is to contribute to the debate by shedding light on the relationship between managers' attitudes toward unethical behavior and their subsequent entrepreneurial intention (EI) in an emerging economy context. Given the complex and multifaceted interplay between unethical behavior and EI, we extend our investigation by including decision-making speed and attitude toward risk to explain the relationship further. We take a granular approach to facets of unethical behavior to gain deeper insights into the specificity of influences they pose on subsequent behavioral intentions. METHODOLOGY: Primary data were collected from 214 Kosovan managers employed in companies from different industries. Hypothesized relationships were tested by conducting hierarchical regression analyses. FINDINGS: Our results indicate that managers with higher EI are not necessarily unethical overall. We did not find support for the hypothesis that managers with stronger attitudes toward unethical behavior demonstrate higher entrepreneurial intentions. Focusing on dimensions of unethical behavior, we find that managers who favor bribery are more entrepreneurially inclined. Furthermore, we find that managers who are quick decision-makers and risk-takers express higher EI. IMPLICATIONS: Theoretically, we add to the existing body of research on ethics and entrepreneurship by empirically examining the relationship between attitude toward unethical behavior and EI and the viability of the Theory of Planned Behavior as a framework for integrating unethical behavior in entrepreneurship research. Our study affirms the extension of the theoretical and empirical underpinnings concerning ethics and entrepreneurship, contemplating that they are pervasive across contexts. We provide important practical implications for managers, especially in the corporate entrepreneurship and training context. Managers are encouraged to foster an entrepreneurial-friendly environment that abides by ethical standards. Our study also informs policymakers of the importance of formal education on entrepreneurship as a mechanism to enforce ethical awareness in future entrepreneurs and intrapreneurs. ORIGINALITY AND VALUE: This study is among the first attempts to test the relationship between unethical behavior and EI in a managerial sample and non-western context.
... policymakers alike have been interested in better understanding the nature of the shadow economy due to its economic size 1 and the challenge of the cost incurred by an economy. Moreover, this concern has been fuelled by a burgeoning literature devoted to studying the relationship between the shadow economy and its determinants (F. Schneider 2011;F. G. Schneider and Enste 2013), which further emphasizes its significance. ...
Using a novel shadow economy measure constructed from a two-sector dynamic deterministic general equilibrium model, this paper provides the first piece of evidence on the convergence dynamics of the shadow economy at the U.S. state level over the period 1999–2019. The result of the panel club convergence test demonstrates the absence of absolute convergence but also identifies the presence of six club memberships without an apparent regional conglomeration. Further analysis based on the ordered logit regression uncovers that factors such as gross state product, the share of higher education, government size, the share of union participation, capital tax rate, institutional quality, and unemployment rate significantly influence the club membership of the shadow economy. Understanding these findings is imperative for developing policies to curtail the spread of shadow economies across the states in the U.S.
... According to other research, the percentage is much higher and approaches or exceeds 70% in developing countries (Vlachaki, 2015). A significant strand of the literature has studied the causes and effects of the informal economy (see, among others, Schneider and Enste, 2013;Medina and Schneider, 2017), and some of them have investigated the impact of taxes on the informal economy (Eilat and Zinnes, 2002;Neog and Gaur, 2021). The shadow economy is consequently the cause of a potentially substantial loss of revenue for governments, leading to the possible underfinancing of public service and an 'unfair' burden on honest citizens. ...
... La perspectiva sociológica destaca la importancia de los datos demográficos y las características personales para explicar el comportamiento de los participantes en la economía informal. En este sentido, atributos como la edad, el género, el estado civil, el nivel educativo, el nivel de ingresos y la situación financiera, entre otros, son determinantes en la propensión a participar en el sector informal (Schneider & Enste, 2013). Estos factores pueden considerarse a nivel organizacional analizando aspectos de tamaño, forma legal, sector económico, etc. ...
El trabajo tiene por objetivo describir cómo influyen los factores del sistema tributario y las características de la organización en la informalidad empresarial en Argentina. Metodológicamente, se desarrolla una investigación cualitativa-descriptiva con datos primarios recolectados mediante entrevistas a empresarios y contadores públicos de la ciudad de Bahía Blanca (Buenos Aires, Argentina). Se efectúa un análisis de contenido cualitativo, empleando codificación basada en teoría. Según los resultados, la onerosidad tributaria; el diseño y aplicación de los controles fiscales; las consecuencias del incumplimiento; y la administración y destino de los recursos fiscales son factores del sistema tributario influyentes en la informalidad empresarial; mientras que el tamaño, la tipología tributaria, el sector, el tipo cliente, el domicilio fiscal y la ubicación, y el medio de pago son características de la organización y de la operación con influencia en el fenómeno. Asimismo, la interacción entre los factores desalienta el cumplimiento fiscal. Los hallazgos contribuyen con la formulación de políticas públicas para reducir la informalidad.
... Informal activities are increasing and occur in countries and regions with different levels of economic development (Castells and Portes, 1989). Schneider and Enste (2003) categorize informal economic activities into legal (informal sector) and illegal activities, further distinguishing between an informal sector that produces illegally but has legal output for goods or services, and a criminal sector that supplies illegal products. Informal waste management is prevalent in primarily Asian countries, such as India (Agarwal et al., 2005;Streicher-Porte et al., 2005;Hayami et al., 2006), Ghana (Brigden et al., 2008), Turkey (Tinmaz and Demir, 2006), Vietnam (Mitchell, 2008), and Tanzania (Kaseva and Gupta, 1996). ...
... Xie et al., 2019), therefore impose additional pressure to firms that adhere to the all rules and disciplines. We therefore include a dummy variable on whether a firm competes against unregistered or informal rivals because this would profoundly affect firms' growth especially in developing economies (Schneider & Enste, 2013). ...
This article empirically studies the influence of firms' independent research and development on productivity. It considers two R&D behaviours of firms: independent innovation and dependent imitation. We acquire data from 28 post-communist economies between 2017 and 2019, and innovatively create indices to evaluate how likely firms were to independently perform green R&D that enhance their environmental friendliness. We also estimate firms' productivity with a semiparametric method. Overall, independent green R&D does not significantly affect productivity. However, further analysis that considers the firms' globalisation statuses reveals interesting and robust findings. Among firms that are actively involved in the global market, a higher R&D independence does not promote productivity. Firms producing only domestically, however, expect a positive influence of R&D independence on their productivity. This finding remains robust under alternative analyses regarding general R&D. Other factors such as labour input, relationships with the government, and informal market competition also significantly affect productivity.
... Third, we follow the literature to use 20 additional control variables, which are defined as potential determinants of the shadow economy in previous studies. These additional variables are: financial development (FD) (Canh & Thanh, 2020); human capital accumulation (HC) (Batrancea et al., 2018); government expenditure (Govex) (Goel et al., 2019); economic uncertainty (EcoU) (Nguyen & Su, 2021); economic structure including agricultural activities (Agri); industrial activities (Industry) (Schneider & Enste, 2013); economic integration including trade openness (Trade) and FDI inflows (FDI) (P. N. Canh et al., 2021); natural resources rents (NRR) ; inflation (Inf) (Baklouti & Boujelbene, 2020); gender equality (GE) (Ćorić, 2018); Internet diffusion (Internet) (Elgin, 2013); income inequality (Gini) (Yap et al., 2018); economic freedom (Ecofree), and its six components including property rights (Proright), government integrity (Govinter), business freedom (Busfree), labour freedom (Labfree), trade freedom (Tradefree), and investment freedom (Invfree) (Berdiev et al., 2018). ...
This study endeavours to expand our knowledge on the role of colonial history, socialist history, religion, and legal systems in explaining the size of the shadow economy across countries. Empirical analysis is carried out for a global sample of 148 countries from 2002 to 2017. Besides formal institutional quality, four other factors of institutions such as colonial history, dominant religion, socialist or socialist history, and origin of the legal system. First, formal institutions are reaffirmed as important factors in reducing the shadow economy. Second, colonial history, socialist history, religion, and legal systems are found to be critical in explaining persistent differences in the size of the shadow economy between countries. Specifically, after controlling for key determinants of the shadow economy, countries with one dominant religion, socialist history, mixed legal system, or common law system appear to have higher levels of shadow economy. In contrast, countries with a colonial history or civil law system seem to have lower levels. Third, there are some heteroscedastic effects of other determinants on the shadow economy in colonial history, socialist history, religion and legal systems. Last, the role of colonial history, socialist history, religion, and legal systems in clarifying the size of the shadow economy seems to be heteroscedastic across seven regions.
... Rakowski, 1994), research undertaken in the informal sector has been minor given the large extent of this sector. Some estimates suggest that the informal sector contributes about 40 to 60% to the GDP of developing countries (Schneider and Enste, 2013), while employing about 31.5% of people from non-agricultural domain (e.g. Jagtap, 2019). ...
Product design is one of the key features of intellectual and creative abilities of humans. Activities of product design have attracted not only experts, but also those without any design training. Many people - working in metalworking microenterprises in the informal sector of developing countries - engage in the activities of designing and manufacturing products. However, since extant design research is mainly undertaken in developed countries, there is scarce knowledge about design activities in informal metalworking microenterprises in developing countries. This paper aims to address this issue by uncovering some aspects of design processes in such microenterprises. In particular, we explored: various product attributes that these microenterprises consider in designing products, the process steps they follow in requirements identification and solution generation, and resources (e.g., design methods, training, etc.) available to them. To explore these aspects, we conducted semi-structured interviews in 24 informal metalworking microenterprises in Tanzania. The findings have important implications for supporting their design activities.
... The shadow economy is a complex phenomenon that imposes ramifications on the formal economy. For this reason, over the past several decades, economists have been tasked with measuring the size of the shadow economy and better comprehending its implications (Schneider and Enste, 2013;Medina and Schneider, 2017). The shadow economy's intricate nature and the economic and social problems it causes led to the emergence of a vast literature devoted to measuring its size, possible drivers, and consequences Almenar, Sánchez and Sapena, 2020). ...
... Apart from the policy-driven mitigating factors, we consider the possibility that certain structural characteristics of the economies under question can mitigate the effect of worsening economic conditions, particularly when they are persistent over several years. Shadow economy in Europe ranges from 10% of GDP in the UK to more than 20% in the Southern European countries (Schneider and Enste, 2013). Several works have examined its determinants and have found that bureaucracy and other institutional characteristics of the country have a significant impact on the size of the shadow economy (Kus, 2010;Schneider and Kearney, 2013;Adriaenssens and Hendrickx, 2015). ...
We empirically investigate the role of fiscal policies on criminal activity using a sample of 25 EU countries over the period 2000-2013. Our analysis indicates that tight fiscal policies appearing to have a positive effect on crime. This effect becomes stronger when property (non-violent) crime rates are considered. Further, the presence of high levels of shadow economy in a country provides a very strong mitigating factor on the adverse effect of public policies on crime. The initially strong link between tight fiscal policy and non-violent crime weakens significantly in the presence of undocumented economic activities which compensate for the lack of formal economic opportunities.
The collection of value added tax (VAT) is essential for achieving domestic revenue objectives, yet VAT gap estimation is rarely performed in developing countries. This study utilizes innovative tax declaration and audit data to estimate VAT misreporting in Tanzania, applying a machine learning approach to predict evasion in unaudited firms and periods. We measure the underreporting component of the compliance gap, quantifying potential revenue losses due to inaccurate reporting. Our findings indicate that firms often avoid excessive audits, leading to increased evasion, with those firms showing the largest VAT gaps. We estimate a 62% VAT gap among small and medium-sized enterprises in Tanzania. Finally, we present a cost-benefit ratio, suggesting that while auditing sectors with large VAT gaps is cost-effective, those contributing significantly to the overall VAT gap should also be prioritized for revenue generation. (JEL codes: H25, H26, and H32)
Стаття присвячена виявленню рівня досліджень в галузі економічної злочинності на основі аналізу публікацій в журналах, які включено до наукометричних баз Scopus / Web of Science. У роботі проведено аналіз джерел та публікацій за темою дослідження з метою ідентифікації сучасних тенденцій та трендів з метою розширення теоретичних знань про економічну злочинність як об’єкт економічного дослідження та розробки сучасної методології формування і реалізації державної політики, зважаючи на передові дослідження. Проведено бібліометричний аналіз, основною метою якого є вивчення бібліографічного матеріалу та визначення основних наукових напрямків у досліджуваній галузі та взаємозв’язків між ними. Ідентифіковано необхідність вивчення публікаційної активності з використанням бібліометричного аналізу, яка зумовлена передусім потребою в ефективній і кваліфікованій обробці невпинно зростаючої кількості опублікованих статей за відповідною тематикою.
From the perspective of individual taxpayers to international tax norm negotiators, the anthropologists in this collection explore how taxes shape our world: our social relationships and value regimes, how we exclude and include, the categories we think with, and the way we share with each other. A first of its kind, it presents an anthropological discussion about tax rooted in ethnographic work. It asks fundamental questions such as: what is tax, what is taxable, and what do taxes do? By forwarding multiple perspectives from around the world about fiscal systems and how they are experienced and constituted, Anthropology and Tax reconceptualises tax in society. In doing so, this volume makes an incisive intervention in what might be one of the most important debates of our time – that of fiscal sociality. This title is also available as Open Access on Cambridge Core.
The aim of the study was to assess and analyse the shadowing of the national economy, as well as to determine the impact of its shadowing on the reduction of tax revenues to the state budget. The research employed general scientific, economic, and mathematical assessment methods, such as regression analysis, correlation analysis, interval forecasts, as well as econometric models of Lacko's household electricity approach, as well as modelling of the shadowing level using the multiple indicators-multiple-causes (MIMIC) model. The calculations and analysis gave grounds to determine the level of the shadow economy of Ukraine based on the state statistics of shadowing trends. There is currently an upward trend estimated to be 37.1% of GDP in 2022 compared with international data, which indicates a rapid growth of the shadow economy from 27% in 2019 to 44% in 2022. An alternative method of assessing the shadowing level was proposed in order to level the peculiarities of calculating the level of shadowing of the economy. According to the calculations, it was 43% in 2022. It was determined that the rapid growth of the shadow economy is an indicator of a reduction in tax revenues, especially in 2022 — by almost 8%. The correlation analysis proved that the increased shadowing level is an indicator of the reduction of tax revenues to the budget of Ukraine. The conducted analysis has certain limitations, therefore it is advisable to further test the hypothesis regarding the indicator of tax revenue reduction on a larger range of data and to apply an alternative method of assessing the shadowing level for developed economies, such as the countries of the European Union (EU).
The article is devoted to the topical issue of management diagnostics of the security of economic recovery. The priorities of international cooperation in secure economic development and economic recovery of the country in postwar times are focused. The peculiarities of the economy and business environment of the country, which influence the international cooperation of post-war restoration of the country and are updated from the standpoint of further regulatory impact, including: asymmetry in the placement of productive forces of the country, presence of old industries and imperfect technologies; destruction of the industrial complex of regions of the East and the Center of the country; innovative degradation and loss of scientific potential; destruction of cities and towns, infrastructure and logistics; ecological and chemical pollution of land, reservoirs; economic and social instability, lack of state strategy of post-war recovery, are systematized. Key conditions of post-war economic recovery in Ukraine, namely: completion of hostilities in the territory of the country, formation of international rules and security guarantees for Ukraine; return of the population from abroad and its adaptation to living conditions in the country; international support and targeted restoration funding; institutional and legal consolidation of the action of projects and programs of international assistance; restoration of the functioning of market mechanism in the overwhelming part of the economy; the issue of ownership, its preservation from the standpoint of compliance with national economic interests, are considered. It is noted that to ensure the security of economic recovery in the country it is necessary to create an effective management system for this process. Key elements of such a system are outlined. The importance of management diagnostics of the security of economic recovery is substantiated. Key stages of management diagnostics of the security of economic recovery of Ukraine are determined. The requirements for management diagnostics of the security of economic recovery are outlined. Functional burden of management support of the security of economic recovery, which gives an opportunity to expand the initiatives of international cooperation agents in the formation of a security field of activity and balance of the interests of all interested participants in the process, is determined
The informal sector activities account for a significant proportion of production, consumption, and employment in the country. However, informal firms tend to be small and are unable to provide basic goods and services to the entire population. Additionally, informal workers are more likely to be poor and earn lower wages compared to their formal sector counterparts. The government of Nepal is actively working to address these issues, including the enforcement of anti-money laundering (AML) regulations in the banking, finance, and cooperative sectors. However, the enforcement of AML regulations should be approached cautiously to prevent the potential transfer of informal money to other sectors and to avoid security problems. The study aims to explore the relationship between various economic indicators and informal monetary activities in Nepal, with a focus on finding ways to regulate and formalize these activities. Large samples of 385 were surveyed through structured questionnaire. The informal economy in Nepal has important macroeconomic consequences, and the government is working to address the challenges it poses. However, the enforcement of AML regulations should be approached cautiously to prevent the potential transfer of informal money to other sectors and to avoid security problems. The study aims to explore the relationship between various economic indicators and informal monetary activities in Nepal, with a focus on finding ways to regulate and formalize these activities. Keywords: Informal monetary activities, Hidden economy, AML regulations, Small saving groups, Remittance
The shadow economy has a significant impact on the development of both the world and individual countries. It distorts indicators of economic growth, formation of national wealth, income distribution. In addition, the shadow sector of the economy is characteristic of any country, regardless of its level and quality of development. According to individual countries, the factors affecting the shadow economy have certain specific characteristics, as they allow us to judge not only the size of the shadow sector in individual countries and compare countries according to this indicator, but also through them it becomes possible to analyze and create an idea of a particular country’s economic, political and social stability, economic security, efficiency of state management, tax system, level of corruption, mechanisms of budget formation, conditions of implementation of investments (especially foreign investments), level of informal employment, etc. The scope and factors of the shadow economy in countries with different incomes and in the regional prism are discussed in the presented work.
This paper aims to identify the informal economic sectors in Quetta City, which has not been done before. Twenty-five semi-structured interviews were conducted with the relevant decision-maker officials of the Government of Balochistan and Pakistan. The researcher transcribed the interviews verbatim; thematic analysis was used to draw the results. Furthermore, the desk review method was used to justify the sector's identification for the informal economy. The literature on the Pakistan Standard Industrial Classification, Pakistan Statistical Bureau, Stats Rules, State laws, and State Ordinances were considered in desk review. The study contributes to the existing knowledge about the informal sector classification; the study asks unique questions about the importance of the informal sector and government work, which cannot be asked quantitively. The study highlighted the informal sector classifications and identified the sectors containing informal business activities. The study justified the alternative aggregation for the informal economic sectors from the International Standard Industrial Classification, 2008. The qualitative data indicated many examples of informal activities in Balochistan province, which helps to identify the informal sectors of Balochistan and Quetta city. The research analyses each sector; the sector was eliminated and included with particular logic and reasons. The research identified 11 sectors suitable for informal economic activities in Quetta City. The study highlighted the illegal economic activities carried out in the city, which the authorities must monitor.
Przeciwdziałanie uchylaniu się od opodatkowania i unikaniu opodatkowania VAT1 wymaga coraz bardziej skomplikowanych narzędzi kontroli i wykrywania oszustw, co skutkuje zwiększeniem obciążeń czasowych i kosztowych nakładanych na podatników. Celem artykułu jest zdefiniowanie terminu VAT compliance i przedstawienie możliwości jego wykorzystania w obszarze wpływu na odpowiedzialność podatkową i karną skarbową. W tym też zakresie odniesiono się do pojęć nadużycia prawa oraz zachowania należytej staranności. Terminy te wyprowadzone zostały z orzecznictwa Trybunału Sprawiedliwości Unii Europejskiej (TSUE).
In this article we develop and analyse novel datasets to retrace the persistence and scale of underground market activity in Maoist China. We show that, contrary to received wisdom, Chinese citizens continued to engage in market-based transactions long after “socialist transformation” was ostensibly complete, and that this activity constituted a substantial proportion of local economic output throughout the Maoist era. This helps to explain, in part, why, when markets were officially reopened in China, private economic activity took off. We arrive at these findings through the development and analysis of novel datasets based on unconventional historical sources – namely, a collection of 2,690 cases of “speculation and profiteering” that were recovered from flea markets in eastern China. We show how these grassroots sources can be systematically analysed and used, in lieu of official statistical aggregates, to develop new insights into the macro workings of the Maoist economy.
Studies of tax rates and currency holdings have played an important partin recent perceptions of the changing size of the underground economyin Canada. This article examines how changes in a variety of tax ratesand in the tax mix can be used to help explain variations in currencyholdings and thus in underground economic activity. Measures of twoaverage direct tax rates and eight marginal tax rates are separatelyexamined along with an average indirect tax rate.The estimates are more sensitive to the choice of marginal direct ratesthan to average direct rates. However, the estimates are considerablymore sensitive to the choice of the income velocity of undergroundcurrency, given the range within which it might lie. When thetheoretically best tax rates are selected and a range of plausible velocityvalues is used, this method estimates underground economy growthbetween 1964 and 1995 at between 3 percent and 11 percent of grossdomestic product. The present size of the underground economy is notknown; it depends on its size in 1964, about which we have no firmknowledge, as well as its growth since then.The results suggest that the underground economy grew until the late1970s and remained roughly constant until about 1987, when the currentperiod of growth began. Its growth was due to changes in both directtaxes (personal income tax and payroll taxes) and indirect taxes(provincial sales taxes and the more recent goods and services tax [GST]).Estimates suggest that changes in the tax mix that increase indirecttaxes and decrease direct taxes seem unlikely to improve tax complianceand reduce the size of the underground economy. The change in theindirect tax mix owing to the removal of the manufacturers’ sales tax andthe introduction of the GST contributed to the growth of the undergroundeconomy in recent years.
This article summarizes the theoretical and empirical results of an interdisciplinary study of the investment behavior of private investors. The study is based on the Subjective Expected Utility (SEU) Theory and includes findings of sociology, economics and social psychology. The research focuses on the individual decision heuristics, which represent and describe the empirical decision processes. The processes are characterized by simplifications, the main types are habits, frames, satisfying behavior, filters and delegation of decisions. Crucial for the different size of the decision process is not only the cost intensity (high-/low-cost decisions) but the involvement. The description of elements of the extended SEU-model and the decision heuristics is followed by a presentation of main results. The comprehensive observation and analysis gives new impulses for modifications and the theoretical discussion about the applicability of the SEU Theory. What are the influences of frames and habits on the complexity of the decision process? How are probabilities estimated? In addition, an innovative combination of experimental, qualitative and quantitative social research methods was used for the survey. It allows measurements without too much standardization, but still with the option of interpersonal comparisons.
The growing shadow economy in Germany is a challenge to the welfare state and economic policy. The burden of taxation and social security contributions combined with rising state regulatory activities are the main causes for the increase in the shadow economy. The consequences are ambivalent, since illicit work can increase welfare and boost institutional change but can also lead to a crisis of the welfare state. A substantial reform of the social security system and the tax system can reduce the incentives to use the 'exit option'. In addition, the use of the 'voice-option' must become more attractive.
This paper endeavors to take up the neglected aspects of federalism and direct democracy. It emphasizes the mutual dependence of the two for reaching the goals of efficiency and trust. Direct democracy is seen to preserve federalism, but even more importantly, federalism is taken to enable and to preserve effective direct democracy. Empirical evidence is adduced showing in particular that direct democracy leads to higher efficiency in the sense of lowering transaction costs. A proposal for a novel combination of federalism and direct democracy—which is called FOCJ (the acronym for Functional Overlapping Competing Jurisdictions)—is suggested for Europe.
The official National Accounts of Tanzania suffer from two serious weaknesses: incomplete coverage as well as inaccurate estimates of the activities covered. This arises because many of the activities, especially those in the informal sector, are either misreported or underrecorded. Often, however, the required information is deliberately concealed from public authorities either because the agents are involved in illegal (black market) activities or where such (parallel market) activities are legal, there is a deliberate intention to evade government controls. The misstatement and omission of these “second economy” activities from official statistics imply that macroeconomic measures are not robust enough for meaningful analysis, development planning, policy and program formulation. This paper attempts to estimate the magnitude of, and changes in the second economy in Tanzania, to establish the extent to which official statistics misstate actual production of goods and services.
In a widely quoted study B.S. Frey and H. Weck-Hannemann estimated the size and the development of the shadow economy in 17 countries by means of the latent-variable approach. A re-analysis of the data shows that the results of Frey and Weck-Hannemann's model are extremely unstable, and cannot be regarded as reliable statements about the shadow economy of these 17 countries. Even minor variations in the number of countries included in the analyses, in the period under investigation or in the index which is defined, lead to a pronounced instability. A critical look at the observational variables used in the model lead to the conclusion that the authors cannot even be sure that what they have investigated is indeed the shadow economy. The latent variable could equally well be interpreted in other ways. It could be, for instance, that they have measured the development of the welfare state.
When the option of tax evasion is included in the individual’s labor supply decisions, it is shown how the labor market is divided into an irregular and an official market. The impact of changes in tax rates, wage rates and the probability of being caught on the supply of labor in these two markets of the economy is calculated.
Public finance solutions to the European unemployment problem?
Developing countries may hold as much as 25-30% of the 100 note. However, large-denomination notes are also extremely popular in the OECD underground economy, which appears to hold at least 50% of the currency supply. As a result, the seigniorage revenues obtained by issuing large-denomination notes may be an accounting illusion, substantially or fully offset by losses due to increased tax evasion. Hence, the new European Central Bank may wish to consider policies that discourage underground use of currency, even at the expense of losing out on foreign demand.
— Kenneth Rogoff