Empirical Analysis of the Shadow Economy of the South East European Countries

Luljeta Sadiku (), Nimete Berisha () and Murat Sadiku ()
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Luljeta Sadiku: State University of Tetovo
Nimete Berisha: University of Prishtina
Murat Sadiku: South East European University

A chapter in EU Crisis and the Role of the Periphery, 2015, pp 41-56 from Springer

Abstract: Abstract Shadow economy is related to the issue of non-reporting and/or underreporting of market transactions by economic agents. The prevalence of shadow economy can have serious impact on economic growth as well as on income distribution in a country. Findings in the literature about the size of shadow economy in SEE countries reveal relatively high levels of shadow economy. Therefore, the main purpose of this paper is to assess the size of shadow economy in the South East European countries by some new estimates covering the period from 2003 to 2011. The paper also investigates the response of the shadow economy to financial crisis. The Multiple Indicators Multiple Causes (MIMIC) estimation procedure is used in order to estimate the size of the shadow economy. The econometric results obtained show that the average size of shadow economy of SEE countries is at about 33 % of the official GDP. The last 3 years show a slightly increasing trend in the magnitude of shadow economy in most of the countries compared to the previous period. This trend highlights the fact that the financial crisis has negative implications on the shadow economic activities.

Keywords: Shadow economy; SEE countries; Size; Estimate; MIMIC method; Financial crisis; E60; C50; C10 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:spr:conchp:978-3-319-10133-0_3

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DOI: 10.1007/978-3-319-10133-0_3

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