Tackling the Shadow Economy in Azerbaijan: Are There Any Results?

This study provides a comprehensive assessment of Azerbaijan’s recent efforts to tackle its shadow economy—a persistent challenge in post-Soviet and developing contexts. While empirical data suggest a decline in relative size of shadow economic activities since 2000, the shadow economy still accounts for approximately one-third of GDP, posing structural risks to long-term development. To evaluate the effectiveness of anti-shadow economy policies implemented since 2018, the authors conducted an expert survey with 87 specialists from academia, public sector, private sector and civil society. Utilizing both quantitative analysis of the questionnaire results and thematic analysis (TA) of open-ended qualitative responses, the study explores the perceived sufficiency of government measures and identifies key economic, institutional and cultural factors driving informality. Findings reveal that while punitive and administrative efforts have made progress, limited public awareness, weak institutional trust and insufficient incentives for formalization continue to constrain outcomes. The study underscores the need for a multidimensional policy shift—from control-based approaches to more inclusive strategies that promote fair competition, fiscal transparency, legal predictability and public-private cooperation. The study concludes with detailed policy recommendations to ensure a sustainable transition from informality to formal economic activity.