Measuring the Shadow Economy in Uzbekistan Using the Electricity Consumption Model

This study estimates the size and trajectory of Uzbekistan’s shadow economy by applying an enhanced Electricity Consumption Model (ECM) using hourly electricity data from 2018 to 2024. In economies where formal statistics are incomplete or distorted, electricity consumption serves as a reliable physical proxy for total economic activity—both formal and informal. The model regresses electricity consumption against official GDP while accounting for structural changes and energy efficiency through a time trend. Results indicate a long-run elasticity of approximately 0.29, reflecting substantial energy intensity reductions in Uzbekistan over the study period. The shadow economy is estimated to have constituted over 60% of official GDP in the early 2000s, declining steadily to 35–40% by 2023. This downward trend aligns with recent reforms aimed at improving tax compliance, liberalizing currency exchange, and expanding SME formalization. The findings are consistent with estimates from MIMIC models and official government releases, confirming the model’s robustness. Sectoral patterns—where informality is highest in agriculture and services—are also reflected in the electricity-based estimation, though low-energy-use activities may lead to underestimation. Policy recommendations include further simplification of tax procedures, broader use of digital payments, and continued investments in reliable energy infrastructure and data transparency. Overall, this paper demonstrates that when adapted to local context and structural trends, the ECM approach provides an effective tool for measuring informality and tracking progress in economic formalization in transitioning economies like Uzbekistan.