Decomposing the Grey Economy in Bulgaria - A General-Equilibrium Analysis

Aleksandar Vasilev

Bulgarian Economic Papers from Faculty of Economics and Business Administration, Sofia University St Kliment Ohridski - Bulgaria // Center for Economic Theories and Policies at Sofia University St Kliment Ohridski

Abstract: This paper attempts to assess the size of the grey economy, and provide a decomposition by evasion type. The modelling approach utilizes a standard micro-founded general-equilibrium setup, which is augmented with a revenue-extraction mechanism and a government sector. The model is calibrated to Bulgaria after the introduction of the currency board (1999-2018). A computational experiment performed within this setup estimates that on average, the size of total evasion is a bit more than one-fourth of output, an estimate which is in line with the figures provided in both Philip (2014) and the European Commission (2014). Two-thirds of the model-predicted evasion is a combined result of income- and social security evasion, while the rest is due to VAT evasion.

Keywords: tax evasion; general equilibrium; Bulgaria (search for similar items in EconPapers)
JEL-codes: D58 E26 H26 K42 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2022-08, Revised 2022-08
New Economics Papers: this item is included in nep-dge, nep-eec, nep-iue and nep-tra
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https://www.uni-sofia.bg/index.php/eng/content/dow ... file/BEP-2022-06.pdf First version, 2022 (application/pdf)

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Journal Article: Decomposing the Grey Economy in Bulgaria: A General-Equilibrium Analysis (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:sko:wpaper:bep-2022-06

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