The Impact of the Institutional Environment on the Shadow Economy

Tural Makhmudov (), Maria Konovalova (), Olga Kuzmina () and Natalia Persteneva ()
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Tural Makhmudov: Department of Economic Theory, Samara State University of Economics, Russia
Maria Konovalova: Department of Economic Theory, Samara State University of Economics, Russia
Olga Kuzmina: Department of Economic Theory, Samara State University of Economics, Russia
Natalia Persteneva: Department of Mathematical Statistics and Econometrics, Samara State University of Economics, Russia

Acta Oeconomica, 2018, vol. 68, issue 1, 115-133

Abstract: This article aims to explore the relationship of the shadow economy with the institutional environment and develop practical recommendations for government policies around the world, and particularly in Russia. The urgency of the issue under research is caused by the existing need to study the shadow economy in order to find ways to reduce its scale and level out its negative externalities. Despite the fact that most of the papers focus on tax burden as a fundamental determinant of the shadow economy, the authors of this article believe that institutional tools can expand the boundaries of research on the content of the shadow economy as an economic category. Statistical analysis of 105 countries with different development levels revealed a stronger correlation between the quality of institutions and the size of the shadow economy than the one between total tax burden and the size of the shadow economy. The findings of this article can be useful in developing state strategies for combating the shadow economy and carrying out economic policies of the state as a whole.

Keywords: shadow economy; institutional environment; quality of institutions; trust in institutions; Russia (search for similar items in EconPapers)
JEL-codes: A13 B52 O43 (search for similar items in EconPapers)
Date: 2018
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