Causes of the Shadow Economy

Milojko Arsić (), Mihail Arandarenko (), Branko Radulovic, Saša Ranđelović () and Irena Janković ()
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Milojko Arsić: University of Belgrade
Mihail Arandarenko: University of Belgrade
Saša Ranđelović: University of Belgrade
Irena Janković: University of Belgrade

Chapter Chapter 4 in Formalizing the Shadow Economy in Serbia, 2015, pp 21-46 from Springer

Abstract: Abstract A shadow economy does not happen by accident. It is a recognised consequence of imperfections in the economic system and inadequacies in economic policy. While the factors that generate and foster the growth of a shadow economy are many and complex, literature considers the following to be the most important: excessive tax burden, government over-regulation of business, and poor performance by government bodies (tax, judiciary, police, and other authorities). Identifying the fundamental causes of a shadow economy is a precondition for designing efficient instruments and policy measures to tackle it. The aim of this chapter is to review the main causes of the shadow economy in Serbia. For this purpose we divided the causes of the shadow economy into: causes rooted in the tax system; causes linked to labour market institutions; other institutional and economic causes; and causes present in the financial sector. We analysed these causes using, wherever possible and appropriate, elementary theoretical analysis, comparative data, views held by social partners on how institutions operate, and the results of the Survey on Conditions for Doing Business in Serbia.

Keywords: Minimum Wage; Informal Sector; Shadow Economy; Employment Protection Legislation; Business Entity (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:spr:conchp:978-3-319-13437-6_4

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DOI: 10.1007/978-3-319-13437-6_4

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