DIGITALIZATION AND INFORMALITY IN THE EU: A PESTLE-BASED CLUSTER ANALYSIS

Mastac Lavinia
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Mastac Lavinia: BUCHAREST UNIVERSITY OF ECONOMIC STUDIES

Annals - Economy Series, 2025, vol. 3, 155-167

Abstract: This paper analyses the relationship between digitalisation and the shadow economy in European countries, applying a PESTLE (Political, Economic, Social, Technological, Legal, Ecological) approach. The study proposes an alternative classification of 30 European countries into three clusters (Low, Medium, High), based on the average shadow economy as a percentage of GDP for the period 2000–2022. The aim is to highlight how the degree of digitalisation interacts with institutional quality and other structural variables to influence the level of tax compliance. The research integrates governance indicators (Control of Corruption, Government Effectiveness, Regulatory Quality) and provides a comparative analysis between groups. The results show that technology is not sufficient to reduce the informal economy in the absence of a coherent, legitimate and functional institutional framework. The study contributes to the literature through an applied, contextualised and differentiated perspective on the role of digitalisation in combating the shadow economy.

Keywords: Digitalization; Shadow Economy; Institutional Quality; PESTLE; Governance (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:cbu:jrnlec:y:2025:v:3:p:155-167

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