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The Impact of the Institutional Environment on the Shadow Economy

Author

Listed:
  • 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)

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.

Suggested Citation

  • Tural Makhmudov & Maria Konovalova & Olga Kuzmina & Natalia Persteneva, 2018. "The Impact of the Institutional Environment on the Shadow Economy," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 68(1), pages 115-133, March.
    • Handle: RePEc:aka:aoecon:v:68:y:2018:i:1:p:115-133
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    More about this item

    Keywords

    shadow economy; institutional environment; quality of institutions; trust in institutions; Russia;
    All these keywords.

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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