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The Shadow Economy In The Eastern Partnership Countries: Modelling And Estimating In The Context Of The Needs To Develop Economic Cooperation Between The European Union And Eastern Partnership Countries

Author

Listed:
  • Ruta Baneliene

    (Vilnius Gediminas technical university)

  • Borisas Melnikas

    (Vilnius Gediminas technical university)

Abstract

The paper deals with a highly complicated problem related to the development of economic relations between the European Union and the so-called Eastern Partnership countries ? Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine. The essence of the problem is the extremely excessive level of the shadow economy in the Eastern Partnership countries: the shadow economy considerably affects the situation in the Eastern Partnership countries and it causes in addition a profound negative impact on the economic cooperation with the European Union.The assessment and monitoring of shifts in shadow economies in the Eastern Partnership countries is a crucial issue for the European Union, in particular to make responsible and reasoned policy decisions on the economic cooperation between the European Union and the Eastern Partnership countries. This fact leads to the needs to create and use adequate instruments for modelling and evaluating the shadow economy.The opportunities of using various tools for modelling and evaluating the shadow economy are discussed herein.The main focus of attention is directed to the new integrated approach to shadow economy modelling: this approach is distinguished by the fact that the shadow economy is analyzed and assessed in a holistic manner upon taking into account the different aspects of economic life and economic development processes. A new model applicable to the assessment of the shadow economy in the Eastern Partnership countries is described; this model is based on the idea of the so-called Tanzi model and was developed by covering the traditionally used independent variables such as taxes, wages and salaries, as well as the new modified indicators.The paper describes empirical research on modelling and estimating of the scope and dynamics of the shadow economy in the Eastern Partnership countries, as well as the principal results of the said research. It has been shown that the shadow economy in the Eastern Partnership countries is highly, extensively and even dangerously developed. The results of the research show an existence of a link between the size of the shadow economy and the control of corruption, but this link is very diverse in different countries.The methodological approach and research results presented in the paper can be used to create a decision support system for the development of the economic relations between the European Union and the Eastern Partnership countries.

Suggested Citation

  • Ruta Baneliene & Borisas Melnikas, 2019. "The Shadow Economy In The Eastern Partnership Countries: Modelling And Estimating In The Context Of The Needs To Develop Economic Cooperation Between The European Union And Eastern Partnership Countries," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 8(1), pages 1-19, June.
    • Handle: RePEc:sek:jijoes:v:8:y:2019:i:1:p:1-19
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    References listed on IDEAS

    as
    1. Feige,Edgar L. (ed.), 1989. "The Underground Economies," Cambridge Books, Cambridge University Press, number 9780521262309.
    2. Renzo Orsi & Davide Raggi & Francesco Turino, 2014. "Size, Trend, and Policy Implications of the Underground Economy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(3), pages 417-436, July.
    3. Friedrich Schneider & Andreas Buehn & Claudio E. Montenegro, 2011. "Shadow Economies All Over the World: New Estimates for 162 Countries from 1999 to 2007," Chapters, in: Friedrich Schneider (ed.), Handbook on the Shadow Economy, chapter 1, Edward Elgar Publishing.
    4. Friedrich Schneider & Andreas Buehn & Claudio Montenegro, 2010. "New Estimates for the Shadow Economies all over the World," International Economic Journal, Taylor & Francis Journals, vol. 24(4), pages 443-461.
    5. Trevor Breusch, 2005. "Estimating the Underground Economy using MIMIC Models," Econometrics 0507003, University Library of Munich, Germany, revised 15 Dec 2005.
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    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications

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