Advanced Search
MyIDEAS: Login to save this article or follow this journal

Size and determinants of shadow economies in the Baltic States

Contents:

Author Info

  • Tālis J. Putniņš

    ()
    (Stockholm School of Economics in Riga)

  • Arnis Sauka

    ()
    (Stockholm School of Economics in Riga)

Abstract

This study develops and estimates an index of the size of shadow economies in Estonia, Latvia and Lithuania, and analyses the factors that influence participation in the shadow sector. The index can be used to track shadow economies through time or across sectors and therefore is a useful tool to evaluate the effectiveness of policies aimed ar reducing the size of shadow economies. Our results suggest that the shadow economy in Latvia in 2010 is considerably larger than in neighbouring Estonia and Lithuania. While the shadow economy as a percentage of GDP in Estonia contracted from 2009 to 2010, it expanded in Latvia and Lithuania. An important driver of shadow activity in the Baltic States is entrepreneurs' dissatisfaction with and distrust in the government and the tax system. We also find involvement in the shadow economy is more pervasive among younger firms and firms in the construction sector. The findings of this study have a number of policy implications: (i) the relatively large size of shadow economies in the Baltic States and their different expansion/contraction trends cause significant error in official estimates of GDP and its rates of change; (ii) tax compliance can be encouraged by addressing the high level of dissatisfaction with the tax system and with government (e.g., making tax policy more stable and increasing the transparency with which taxes are spent); and (iii) significant scope exists for all three governments to increase their tax revenues by bringing entrepreneurs 'out of the shadows'.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://biceps.org/assets/docs/bje/Putnins.pdf
Download Restriction: no

Bibliographic Info

Article provided by Baltic International Centre for Economic Policy Studies in its journal Baltic Journal of Economics.

Volume (Year): 11 (2011)
Issue (Month): 2 (December)
Pages: 5-25

as in new window
Handle: RePEc:bic:journl:v:11:y:2011:i:2:p:5-25

Contact details of provider:
Postal: Strelnieku iela 4a, Riga, LV-1010
Phone: +371 7039320
Fax: +371 7039318
Email:
Web page: http://www.biceps.org
More information through EDIRC

Related research

Keywords: shadow economy; tax evasion; Estonia; Latvia; Lithuania;

Find related papers by JEL classification:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Jaanika Meriküll & Tairi Rõõm & Karsten Staehr, 2013. "Perceptions of unreported economic activities in Baltic Firms. Individualistic and non-individualistic motives," Bank of Estonia Working Papers wp2012-8, Bank of Estonia, revised 04 Feb 2013.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bic:journl:v:11:y:2011:i:2:p:5-25. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lelde Ivankova).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.