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Estimating the Shadow Economy in Bulgaria: Survey Evidence for 2023

Author

Listed:
  • Valentin Goev
  • Venelin Boshnakov

Abstract

Market transition in Bulgaria experienced several periods during which a variety of political, social, and economic conditions have facilitated the processes for market reforms and social transformation since 1990. It was expected that EU accession processes (up to 2006) and especially the full integration of the country would substantially reduce the scope of grey economy operations. Nevertheless, the mainstream public opinion and scholarly research indicate the resilient nature of this phenomenon, which still keeps a notable share in economic activities, especially in particular business sectors. The paper presents empirical results from a questionnaire survey conducted in 2023 among business representatives in Bulgaria having expert, managerial, or ownership positions within the firm. The study provides evidence on selected issues related to the shadow economy in Bulgaria after two years of political instability with a series of temporary governments. For example, the business sectors with the greatest extent of the shadow economy spread indicated by the respondents are construction (83%); restaurants, coffee shops and similar establishments (81%); tourism, hotels and accommodation services (61%). The average share of underreported turnover is estimated at 38% for the overall economy, but when asked about their branch, respondents evaluate this share on average at 26%. Furthermore, the mean share of employees having an official labour contract but under “hidden clauses” (e.g. additional envelope wages) is evaluated at 19%, along with 7% on average for those employed without a contract. All results show that the phenomenon still has a significant impact on the economic activities in the country; however, further comprehensive exploration is necessary to reveal adequate alternatives for practical policies to be implemented towards limiting the scope of shadow economy operations.

Suggested Citation

  • Valentin Goev & Venelin Boshnakov, 2026. "Estimating the Shadow Economy in Bulgaria: Survey Evidence for 2023," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 4, pages 74-89.
    • Handle: RePEc:bas:econst:y:2026:i:4:p:74-89
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    File URL: http://archive.econ-studies.iki.bas.bg/2026/2026_04/2026_04_05.pdf
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    References listed on IDEAS

    as
    1. Emilia Chengelova & Milena Angelova, 2022. "Factors Determining the Undeclared Work in Bulgaria," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 65-94.
    2. Stefan Petranov & Ìilena Angelova & Lillyana Georgieva & Radostina Ivcheva & Nino Avreyski, 2023. "Is Tax Morale Homogeneous in Bulgaria?," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 64-87.
    3. Stefan Petranov & Dimitar Zlatinov & Ilia Atanasov, 2022. "The Shadow Economy in Bulgaria During the Period 2006-2019," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 5, pages 3-18.
    4. Goev, Valentin, 2009. "Estimating the hidden economy in Bulgaria," SEER Journal for Labour and Social Affairs in Eastern Europe, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 12(1), pages 79-95.
    5. Kyle, Steven C. & Warner, Andrew & Dimitrov, Lubomir & Krustev, Radoslav & Alexandrova, Svetlana & Stanchev, Krassen, 2001. "Measuring the Shadow Economy in Bulgaria," Working Papers 127656, Cornell University, Department of Applied Economics and Management.
    6. Colin Williams, 2020. "An Institutional Theory of Tax Non- Compliance in Bulgaria: a Tax Morale Approach," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 1, pages 33-49, March.
    7. Vessela Dimitrova, 2024. "Hidden Economy in Bulgaria Estimated by the MIMIC Approach," Ikonomiceski i Sotsialni Alternativi, University of National and World Economy, Sofia, Bulgaria, issue 4, pages 35-51, December.
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    More about this item

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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