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This chapter surveys research on social capital. We explore the concepts that motivate the social capital literature, efforts to formally model social capital using economic theory, the econometrics of social capital, and empirical studies of the role of social capital in various socioeconomic outcomes. While our focus is primarily on the place of social capital in economics, we do consider its broader social science context. We argue that while the social capital literature has produced many insights, a number of conceptual and statistical problems exist with the current use of social capital by social scientists. We propose some ways to strengthen the social capital literature.

This paper explores whether the extent of informality in a sector affects a firm's investment decision directly or indirectly through a credit availability channel. The dataset used in the estimation of the econometric models consists of an unbalanced panel of Uruguayan firms for the period 1997-2008. The results suggest that financial restrictions affect investment decisions in Uruguay, as an increase in credit to the private sector translates into higher investment rates. A one percentage point increase in overall credit growth translates into a one half percent increase in investment rates. It is also found that, although there is no direct effect of informality on the firm investment decision, there is an indirect effect through the borrowing channel. More specifically, financial restrictions reduce the amount of investment undertaken by Uruguayan firms, the effect being smaller if the firm operates in a sector with lower informality.

The paper aims to analyze the relationship between the size of Romanian shadow economy expressed as % of official GDP and active ageing in order to see if the shadow economy represents a social buffer for active ageing phenomena using Granger causality analysis. The size of Romanian shadow economy is estimated previously using a revised version of the currency demand approach based on autoregressive distributed lag (ARDL) approach to cointegration analysis. Using Granger causality tests, we examine the relationship between employment rate for older people and the size of Romanian shadow economy covering the period between 2000 and 2010. The empirical results revealed the existence of a long-run unidirectional causality that runs shadow economy to employment rate for elderly and do not support the existence of any short-run relationship between employment rate for older people and shadow economy.

In 2002, the Mexican government began an effort to improve health access to the 50 million uninsured in Mexico, a program known as Seguro Popular (SP). The SP offered virtually free health insurance to informal workers, altering the incentives to operate in the formal economy. We find that the SP program had a negative effect on the number of employers and employees formally registered in small and medium firms (up to 50 employees). Our results suggest that the positive gains of expanding health coverage should be weighed against the implications of the reallocation of labor away from the formal sector. (JEL E26, I13, I18, I38, J46, O15, O17)

In developing countries, informal firms account for up to half of economic activity. They provide livelihood for billions of people. Yet their role in economic development remains controversial. Some, like Hernando De Soto (1989, 2000), see informal firms as an untapped reservoir of entrepreneurial energy, held back by government regulations. In this view, unleashing this energy by reducing entry regulations or improving property rights would fuel growth and development. Others, like Levy (2008), take a more cynical view, stressing the advantages enjoyed by informal firms and workers from avoiding taxes and regulations. A report from the McKinsey Global Institute describes informal firms as parasites competing unfairly with law-abiding formal firms (Farrell 2004). In this view, informality should be suppressed, not unleashed. Still others follow the development tradition of Lewis (1954), Harris and Todaro (1970), and more recently Rauch (1991) and see informality as a byproduct of poverty. From this dual perspective, formal and informal firms are fundamentally different. Productive formal entrepreneurs pay taxes and bear the cost of government regulation to reach new customers, raise capital, and access public goods. These entrepreneurs are often educated and find it more profitable to run bigger formal firms rather than the smaller informal ones. In contrast, informal entrepreneurs are typically uneducated and unproductive, and they run small businesses producing low-quality products for low-income customers using little capital and

Shadow economy affected for a long time Romania, even since the old regime. During the period 1995-1996, the expansion of this phenomenon has become more serious. Along with Bulgaria, Romania is the second most affected country in the Eastern part of Europe, the shadow economy reaching around 28% of national GDP. This process is boosted by a high level of tax evasion, black labor and overregulation. With the ascension into EU, Romania made considerable efforts to combat the underground economy through a increase of electronic payments, credit card and deposit use.

In this study we investigate the empirical relationship between the size of the informal sector (as percentage of official GDP), carbon dioxide and sulfur dioxide emissions in Turkey by using annual data from 1950 to 2009 and conducting a time-series analysis using cointegration techniques. This analysis is crucial as pollution emissions may lead to unfavorable weather conditions and potentially cause environmental impacts that may adversely affect the global economy. The empirical analysis shows evidence towards the existence of an inverted-U relationship between relative informal sector size and environmental pollution indicators in the long-run. That is small and large sizes of the shadow economy are associated with little environmental pollution and medium levels of the size of the shadow economy are associated with higher levels of environmental pollution. Moreover, using multivariate cointegration techniques, we suggest and test an economic mechanism to account for this observation. This also helps us to prescribe various policy recommendations regarding pollution and energy use.

The concept of informality started to materialize back in the early 1970s. Though it was a foreign notion for many, it still continues to develop nowadays. The debate over informal economy still persists, many believe that informality is linked to poorer countries and economies, and that it would terminate once they reached decent economic development. But, the evolution of informality theory over the last four decades showcased that it cannot be considered as a temporary phenomenon. Recent developments showed that informal economy has the potential to create jobs and produce revenues, therefore a primary challenge remains development of innovative development policies, and it finds the right support to integrate it in the formal economy. This paper engages in treatment of theoretical problems of informality, focusing on conceptual framework of informal economy.

A tanulmány a Svédországban, Hollandiában és Magyarországon zajló illegális tevékenység statisztikai adatait elemzi. A szerző azért ezeket az országokat vizsgálja, mert egyrészt rájuk áll rendelkezésre hosszabb időszakot átfogó adatsor, másrészt ezek az országok igen eltérő módon közelítenek a prostitúció és a kábítószer mint az illegálisan megfigyelni kívánt két legfontosabb terület szabályozásához. Mindhárom országban 1999-ben jelentős változásokat hajtottak végre ezeken a területeken, s tanulságos lehet, hogy ezek az intézkedések milyen eredményeket hoztak. Az elemzése hozzásegíthet az illegális tevékenységek nemzetközi összehasonlításához, Magyarországon a megfigyelési kör kiterjesztéséhez, a további vizsgálatokhoz, valamint a hivatalos statisztikai adatok elemzése segítségével a prostitúció- és kábítószer-szabályozás kérdésköréhez.* Journal of Economic Literature (JEL) kód: C1, E26., The study presents statistical data on illegal activities in three separate countries. Sweden, the Netherlands and Hungary were chosen for a number of reasons. One is the long runs of statistical data available in them. Secondly, they vary greatly in their approach to regulating the criminal fields of drugs and prostitution. Interestingly, all three underwent considerable regulatory changes in these areas in 1999. It may be worthwhile to examine the results of the different approaches, as a contribution to international comparative observation of illegal activities, which also allows expansion and further study of these areas in Hungary, while aiding with official statistics the regulators in the field of prostitution and drugs.

The authors in their article review a well-known money transfer system in Middle-East and Asia. There is an alternative remittance channel that exists outside of traditional banking systems. The main focus of the article is why and how does the systems work in practice? Hawala or hundi is a method of transferring money without any real movement. Transactions between hawaladars or hawala operators are done without promissory notes because the system is heavily based on trust. One definition from Interpol is that Hawala is “money transfer without money movement.” Hawala originated in Asia during ancient times, and is used in many regions in the world today, especially in the Islamic community.

The paper present the features of the underground economy in Romania and the factors’ contribution to its formation: undeclared labour of the formal sector (enterprises), value added tax evasion, and the under-reported incomes of the small entrepreneurs’ sector (family associations and self-employed). The tax evasion for the main budget revenues is estimated starting from the NIS - based valuations of the underground economy. Annual reduction of the undeclared labour with 10% - 15% could provide the necessary budget revenue for the implementation of fiscal relaxation measures, such as reducing the flat tax or the employers' security contribution.

Amonetary union is classified by several authors as an extreme form of fixed exchange rate arrangement. Analyzing exits from monetary unions is, however, demanding. This paper studies the impact of inflation and interest rate differentials on the nominal exchange rate after leaving a form of peg arrangement and moving to a floating regime, as it may serve as a parallel for a monetary union break-up. The theoretical framework is provided by the theory of the International Fisher Effect. We find that countries with rigid exchange rate policy, less frequently adjusted central parity and narrow exchange rate bands experienced sharp depreciation after the shift, but the depreciation was only temporary. In this group of countries the exchange rate adjustment is weakly exogenous to inflation and interest rate differentials. We apply Johansen’s approach to cointegration, based on the estimation of the Vector Error Correction Model, and the Johansen constraint test of exogeneity. There is strong evidence that long-term depreciation could not be expected in a former euro area country after its possible break-up and that inflation and interest rate would not be the driving forces of exchange rate behavior. Finally, parallels between the local currency adoption within a euro area member state and the leaving of the peg arrangement are pointed out.

Tax havens are not recent phenomena. However, in contrast to historical precedents, tax havens in the age of mobile capital allow for non-consensual transfers and are not profitable for every citizen. We discuss the four main groups of tax havens (former Western possessions, sovereign nations, countries controlled by cartels, and emerging economies). This article also synthesizes the history of tax havens and describes their current heterogeneity, discussing the main methods available to regulate tax haven flows. Some of the most efficient methods involve unilateral measures (such as the Fiscal Transparency of Outland Societies) but also encompass multilateral measures (such as Tax Harmonization and the Request for Information).

The knowledge-based society is the stage where mankind is found and aims to raise the living standards of population but also to increase the level of knowledge. To achieve this latter goal, the states of the world, and especially those in the European Union, must ensure an adequate funding for its realization, and therefore in 2011 it was decided at EU level the achievement of an Innovation Union, in which are to be involved all the European countries, while to stimulate and finance research and innovation the Horizon 2020 program was proposed. The results of the Program, an ”Innovation Union” have begun to be felt, so in 2011, the major companies headquartered in the European Union increased their investments in R&D by 8.9% compared to 6.1% in 2010. This increase was almost equal to that of the U.S.A. companies (9%), higher than the world average (7.6%) and superior to Japanese companies (1.5%). The sectors that used the research-development activity have tended to have increases in employment above average. I believe this information highlights the fact that the European Union may become attractive for research-development and innovation investments even for businesses outside the UE, and this can result in jobs creation and increasing competitivenees of this field of the states of the European Union. In the introductory part of the article, I have briefly presented general notions of the three component activities of the ”knowledge triangle”, in the second part I presented the knowledge society with several features, in the third part, I showed some provisions of the program to stimulate research and innovation Horizon 2020, in the fourth part, I presented an innovation activity connection to private enterprise and entrepreneurial initiative stimulation in the field innovation, and the conclusions shows that research does not stop with achieving the objectives and finding the outcomes research, but is it the background for further research, especially in the context of a new economy”, where innovation through knowledge is the most important.

To evaluate how undeclared work is being tackled in Croatia this paper reports an e-survey and in-depth interviews with key stakeholders in Croatia. It is revealed that, compared with the European Economic Area countries, Croatia has a weak institutional infrastructure for tackling undeclared work and pursues a narrower range of policy measures. The outcome is a call to develop a single body to better coordinate actions to tackle the undeclared economy in Croatia and for a shift towards an approach that seeks to provide gateways to formalisation. Furthermore, Croatia needs to modernise its work and welfare regime through higher levels of state expenditure in the labour market and social protection, coupled with redistribution via social transfers so as to construct a more equal society.

Employment is a major concern for Albania, while it transitioned from a centralized economy to a market economy. Labor conditions are an important factor of showcasing the economic wellbeing of the country as a whole. The main concern regarding the labor market is tied to the effects informal employment brings in the economy. Informality in Albania may be as high as 50 percentS of its official Gross Domestic Product, or even higher. When manifested in the economic sphere, informality plays a critical role for creation of jobs and reduction of poverty. Seizing informal economy and especially in the labor market is no easy task. But when achieved it provides visibility to those employed by the sectors, and the contribution they bring to the economy. Informality in the labor market mirrors informality in economy. The paper will focus on effects of employment in the Albanian informal economy, and provide results on a survey held in one of its capital main streets, targeting small businesses.

This paper studies the effects of the introduction of unemployment compensation (UC) in countries characterized by pervasive informality. We provide a simple framework to analyze the impact of UC on the allocation of workers between formal and informal activities, as well as the allocation of workers between sectors featuring different incentives to go informal. We show that a reasonable amount of UC may reduce informality, while larger amounts of UC induce large disincentives to go formal because of the level of taxation involved. We also argue that the financing of UC should be part and parcel of a well- conceived UC system. We show that UC finance based on payroll taxes is likely to entail an excess level of informality resulting from cross-subsidies between heterogenous sectors. The introduction of a simple layoff tax meant to finance the UC system is then shown to reduce informality, hence highlighting how a well-designed financing scheme may be used as a supplementary instrument to curb informality.

This paper investigates the response of the shadow economy to banking crises. Our empirical analysis, based on a large sample of countries, suggests that the informal sector is a powerful buffer, which expands at times of banking crises and absorbs a large proportion of the fall in official output. To rationalise our evidence, we build a dynamic stochastic general equilibrium model which accounts for financial frictions and nominal rigidities. In line with the empirical literature on the shadow economy, we assume that in the informal sector access to external finance is limited, and the production tech- nology is relatively more labour intensive. Following a banking shock in the official sector, the model predicts a large negative transmission to the unofficial economy: about 60% of the official sector contraction is absorbed by the growth of the shadow economy.

We study the dynamic general equilibrium effects of introducing a social pension program to elderly informal sector workers in developing countries who lack formal risk sharing mechanisms against income and longevity risks. To this end, we formulate a stochastic dynamic general equilibrium model that incorporates defining features of developing countries: a large informal sector, private transfers as an informal safety net, and a non-universal social security system. We find that the extension of retirement benefits to informal sector workers results in efficiency losses due to adverse effects on capital accumulation and the allocation of resources across formal and informal sectors. Despite these losses recipients of social pensions experience welfare gains as the positive insurance effects attributed to the extension of a social insurance system dominate. The welfare gains crucially depend on the skill distribution, private intra-family transfers and the specific tax used to finance the expansion.

Incidence of crime in India has been mounting at a fast pace , especially during the last decade. Moreover, crime on body seems to be increasing in comparison to crime on property. Economics and Sociology literature on crime attributes labour market as a transmitting institution for crime. This paper is an attempt to understand the issue of crime in India as a socio-economic problem with particular reference to the Indian labour market. I argue that the poor labour market conditions in the Indian economy that has been developing in the recent past may be a prime factor in explaining the spate of rise in crime rates recently. Panel data analysis of Indian states during the period 2001-2008 show that unemployment and wage inequality are key variables that explains the crime rate in India, especially crime on body. Education similarly seems to reduce property crime rate. Crime also seem to be deterred by an efficient judicial delivery system, however the role of police as a deterrent is ambiguous.

This article’s goal is to highlight the main microeconomic and macroeconomic effects of the 2010 VAT hike in Romania and the Romanian firms’ response to it. At 1st July 2010, the Romanian Government raised the Value Added Tax from 19% to 24%, causing chain increases that delayed with nine months the Romania’s exit from recession. It intended to increase its receivables in a period in which the state budget had problems in collecting taxes. I have concluded that the main microeconomic effect was the plunge of the firms’ sales and the macroeconomic one was the decrease of the Gross Domestic Product (GDP). Regarding the Romanian firms’ reaction to the VAT increase, most of them have ignored the VAT hike and they did not have an important response to such a modification.

Organized crime, in the context of globalization, has become a cross-border phenomenon and, as such, its control can not be achieved only at national level but integrated into global, regional and sub regional one. Moreover, the existing tools and future solutions should provide realtime operating as consuming complex cross-border criminal acts menus very quickly, and the coordinators of these networks follow illegal placing of offenses in the legal circuit, as the money laundering, and in this way acquire a growing power, supplying underground economies at state and regional levels.

Recently, academicians and economists have expressed a great interest about the informal economy of Albania. This is mainly due to the size of informal economy in absolute and relative terms and to the emphasis economists have placed on the increasing evidence that the size of informal economy, calculated as a percentage of GDP has increased, and grown over the past two decades in many countries of the world. In light of the international economic crisis that was evidenced in 2008, the article will discuss problems of informality in economy as a condition for decreasing the dimensions of impact of the recent economic crises. Informality was and continues to be a concern to the economic circles regarding the theoretical definition, measuring its size and ways to reduce its dimensions. Informality in Albania, according to CIA World Factbook, may be as large as 50 per cent of the official GDP during 2007, 2008, 2009, 2010, and 2011. The aim of this paper focuses in the reduction of informal economy as an anti-crisis factor.

This article’s goal is to highlight the main reasons and effects of the adoption of the reverse change for the supply of cereals and industrial plants in Romania in May 2011 on the companies’ activity in our country. In an attempt to diminish the VAT evasion related to sale of crops and grains, the Romanian Government introduced simplification measures for the sale of crops and grains that should also provide a cash flow benefit especially for the Romanian firms involved in cereal trading, thanks to the earlier collection of the inputs’ VAT from the state.

In analyses of the global money and capital markets, economic discourse is mostly focussed on the movement and flow of capital, giving less emphasis to its role in influencing the formation of institutional frameworks as well as national and international rules, particularly in terms of the impact on economic growth. Based on the concept of exit, voice and loyalty developed by Albert O. Hirschman, this paper examines the effect of capital movement and investors’ voice on economic growth, making use of both macroeconomic tools and linear regression based on the data of European countries and Post-Soviet states. Our results indicate that the de facto exit of capital has a negative effect on economic growth, while the de jure exit of capital to the shadow economy and investors’ voice result in a higher growth rate.

With the growing interest on the size of informal economy in Albania, an important concern remains the best ways to reduce its dimension. According to scholars of the field, informality in Albania may be as large as 50 percent of its official GDP, or even higher. A reflection of informality in economy is also displayed by informality in the labor market. The socio-economic changes of the late last century, along with other changes, brought about a high rate of unemployment. The effects of unemployment in Albania s informal economy will be discussed, and one of the methods used for its measure, as well as pinpoint to important lessons drawn when employers and employees are faced with one another. The aim of this paper is to focus on the reduction of informal economy, as seen through labor market lens, as an anti-crisis factor.

According to financial analysis conducted by the authorities, working without legal papers or "in black" is one of the main components of the underground economy matrix and one of the main crimes generating "dirty money". The most common manifestation of the "black" employment refers to under declared employment, which is exercised at the limit of the relevant laws, with negative repercussions both upon the state budget and health insurance budget and therefore the general consolidated budget. The causes of "black" employment are extremely varied, have a multifactorial determination and take the economic situation of the employee and employer at any given time, the level of their training and last but not least, the legal framework and enforcement regime. According to a recent World Bank study, 45% of Romanian employees receive at least part of their salary in an envelope, and as in the public sector there is no black or gray employment, that the private sector, at least 60% of employees receive money for which they do not pay taxes. In this study we tried to highlight some of the causes and factors that determine and influence at the same time "black" employment and features some of the manifestations of the informal economy in Romania.

In recent years, organized crime has expanded considerably, the presence, complexity and importance, and now threatens many aspects of normal life of citizens in private life, work and business. Organized crime promotes corruption, violence and other illegal activities threatening the security of borders and cause human injury. It undermines the integrity of banking systems and financial markets and capital goods and virtual space. International networks of organized crime are a national security problem that requires a concerted policy response of governments.

By analyzing the components of the underground economy matrix, we can say that its financial support is "money laundering" a comprehensive, dynamic phenomenon which lies in the desire of criminals to hide practiced illegal activities behind their sources of income, in order to allow a normal development in society. In this study we tried to highlight some of the features of the phenomenon of money laundering, as well as some preoccupations concerning combating this phenomenon in Romania, member country of the European Union. In this regard, we analyzed the reports of the National Office for Preventing and Combating Money Laundering (N.O.P.C.M.L.) for the period 2006 - 2011, and numerous documents and papers produced over the years in this area, either by the researchers of this phenomenon, either by institutions / national and international bodies empowered for that purpose.

'Varieties of capitalism' have been conventionally delineated by the varying types of formal economy that exist. Given that the vast majority of employment globally is in the informal economy, this paper offers a new analytical framework which delineates varieties of capitalism by their degree of informalization and the character of the informal economy. Examining South East Europe through this lens using evidence from a 2007 Eurobarometer survey, the finding is that this region is a 'quasi-formal market economy' and its informal economy composed largely of quasi-formal employment relations, albeit with significant variations in the degree and nature of the informal economy across different countries, sectors and population groups.

This research is focused on realizing a better understanding of the aspects and the conditions that facilitate human traffick in a full transition society, such as the Romanian society. To highlight the characteristics of human trafficking and the actual dimensions of this phenomenon in Romania, the paper used both quantitative methods involving interpretation of statistics compiled by the competent institutions and the qualitative research methods, involving the analysis of reports, articles or case studies presented in the literature.

This study empirically investigates the extent of noncompliance with the tax code and examines the determinants of federal income tax evasion in the U.S. Employing a refined version of Feige’s (Staff Papers, International Monetary Fund 33(4):768–881, 1986, 1989) General Currency Ratio (GCR) model to estimate a time series of unreported income as our measure of tax evasion, we find that 18–23% of total reportable income may not properly be reported to the IRS. This gives rise to a 2009 “tax gap” in the range of $390–$540 billion. As regards the determinants of tax noncompliance, we find that federal income tax evasion is an increasing function of the average effective federal income tax rate, the unemployment rate, the nominal interest rate, and per capita real GDP, and a decreasing function of the IRS audit rate. Despite important refinements of the traditional currency ratio approach for estimating the aggregate size and growth of unreported economies, we conclude that the sensitivity of the results to different benchmarks, imperfect data sources and alternative specifying assumptions precludes obtaining results of sufficient accuracy and reliability to serve as effective policy guides.

New Estimates of U.S. Currency Abroad, the Domestic Money Supply and the Unreported Economy Edgar L. Feige * Abstract Despite financial innovations that have created important new substitutes for cash usage, per capita holdings of U.S. currency amount to $2950. Yet American households and businesses admit to holding only 15 percent of the currency stock, leaving the whereabouts of 85 percent unknown. Some fraction of this unaccounted for currency is held abroad (the dollarization hypothesis) and some is held domestically undeclared, as a store of value and a medium of exchange for transactions involving the production and distribution of illegal goods and services, and for transactions earning income that is not reported to the IRS (the unreported economy hypothesis). We find that the percentage of U.S. currency currently held overseas is between 30-37 percent rather than the widely cited figure of 65 percent. This finding is based on the official Federal Reserve/Bureau of Economic Analysis data which is a proxy measure of the New York Federal Reserve’s (NYB) “confidential” data on wholesale currency shipments abroad. We recommend that the NYB data be aggregated so as to circumvent confidentiality concerns, and be made readily available to all researchers in order to shed greater light on the questions of how much U.S. currency is abroad and on the particular location of overseas U.S. dollars. The newly revised official estimates of overseas currency holdings are employed to determine the Federal Reserve’s seigniorage earnings from 1964-2010, which have provided a $287 billion windfall for U.S. taxpayers. Overseas currency stock data are also used to derive estimates of the domestically held stock of currency as well as narrow and broad measures of domestic monetary aggregates. These domestic monetary aggregates are believed to be better predictors of future economic activity than traditional monetary aggregates and are tested to determine their ability to predict fluctuations in real output and prices. Domestic cash holdings are finally used to estimate the size of the U.S. unreported economy as measured by the amount of income that is not properly reported to the IRS. By 2010, we estimate that legal and illegal source unreported income” is $1.9 - $2.4 trillion, implying a “tax gap” in the range of $400- $550 billion. Currently, we estimate that 18-23 percent of total reportable income is not properly reported to the IRS.

Asmeninė autorių patirtis byloja, kad šešėlinės ekonomikos Baltijos šalyse ir kitose besivystančiose Centrinės ir Rytų Europos šalyse sudaro žymią dalį nuo bendrojo vidaus produkto (BVP). Straipsnio tikslas yra išmatuoti šešėlinių ekonomikų Estijoje, Latvijoje ir Lietuvoje dydį ir išanalizuoti veiksnius, kurie įtakoja dalyvavimą šešėliniame sektoriuje. Tyrimo rezultatai rodo, kad šešėlinės ekonomikos Latvijoje dalis (38 proc. BVP) yra beveik dvigubai didesnė, nei kaimyninėse Estijoje (19 proc. BVP) ir Lietuvoje (18,8 proc. BVP). Ekonominės veiklos „šešėlyje“ proporcija didėjo nuo 2009 iki 2010 Latvijoje 1,5 procentinio punkto, ir Lietuvoje 0,8 procentinio punkto, bet mažėjo Estijoje 0,8 procentinio punkto. Firmos, kurios yra nepatenkintos mokesčių sistema ar vyriausybe, daugiau dalyvauja šešėlinėje veikloje, tai atitinka ankstesnių mokesčių vengimo tyrimų rezultatus. Santykinai didelė šešėlinių ekonomikų dalis Baltijos šalyse ir jų skirtingos didėjimo/mažėjimo tendencijos lemia didelę paklaidą skaičiuojant oficialų BVP ir jo pokyčius. BVP taikomas skaičiuojant esminius santykius, tokius kaip valdymo deficitas su BVP, skola su BVP, o taip pat jo kitimo greitis laikomas esminiu ekonominės veiklos rodikliu ir lemia politinius sprendimus. Norint sumažinti šešėlinių ekonomikų dydį Baltijos šalyse, daugiausia dėmesio reikia atkreipti į didelį nepasitenkinimą mokesčių sistema ir valdymu. Apibendrinant galima teigti, kad visos trys vyriausybės turi didelių galimybių padidinti savo pajamas ištraukiant produkciją iš šešėlio. 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 at 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 that 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’.

This short paper shows the interdependence of taxation and monitoring policy in a search and matching model of equilibrium unemployment with an underground sector. More precisely, from a social welfare standpoint, two options are available to the policy maker: she/he may either substitute a tighter monitoring with a higher penalty or enforce both a higher taxation and an increased monitoring.

Tax evasion, special component of the underground economy is an economic and social phenomenon whose size has grown in all countries. Tax evasion and has appeared with the state and tax laws. Its cover area is extended to all taxes. It actually aims to minimize taxation through the use of inventive, accessible and real alternatives. The effects of tax evasion are reflected directly on fiscal revenues and expenditures, competition, generating social dissatisfaction, inequity and tensions

This study empirically investigates the determinants of aggregate federal personal income tax evasion in the U.S. using the most current data available from the IRS. In 2010, the IRS released a new series on personal income tax evasion data running through the year 2005. Using this new data, the present study seeks to identify any new as well as traditional determinants of domestic personal income tax evasion. Aside from investigating the most commonly recognized factors that allegedly influence tax evasion, such as a measure of income tax rates and IRS audit rate and penalty interest rate levels, the tax free interest rate yield, the public’s job approval rating of the President, the unemployment rate, the Tax Reform Act of 1986, and the public’s dissatisfaction with government per se are included in the analysis, along with two variables previously unstudied in a purely time-series context, namely, the percentage of filed tax returns that include itemized deductions and the real interest rate yield on Moody’s Baa-rated long term corporate bonds. With the exception of the IRS audit rate, all of these factors are found to significantly influence the aggregate degree of personal income taxation over the 39-year period from 1967 through 2005, the most recent several years of which have not been previously investigated. - Questo studio esamina le determinanti dell’evasione aggregata dell’imposta sui redditi personali negli USA sulla base degli ultimi dati disponibili forniti dall’Internal Revenue Service (IRS). Nel 2010 l’IRS ha reso noti nuovi dati su tale evasione relativi all’anno 2005. Tramite l’utilizzo di questi dati questo lavoro cerca di individuare nuovi elementi – in aggiunta a quelli già noti – che portano all’evasione delle tasse personali sul reddito. Oltre a investigare i fattori che notoriamente influenzano l’evasione fiscale (quali la percentuale delle imposte sul reddito, la quota di dichiarazioni controllate formalmente dall’IRS e il valore delle sanzioni inflitte), sono inclusi nell’analisi il rendimento dei tassi di interesse tax free, il livello di approvazione dell’operato del Presidente, il tasso di disoccupazione, il Tax Reform Act del 1986 e il livello di insoddisfazione nei confronti del Governo, insieme a due variabili mai considerate precedentemente in un contesto puramente time-series: la percentuale di dichiarazioni dei redditi che includono deduzioni dettagliate e il tasso di rendimento reale dei corporate bond a lungo termine con rating Moody Baa. Fatta eccezione per il tasso di audit dell’IRS, tutti questi fattori risultano aver influenzato significativamente il grado aggregato di imposta sui redditi personali del trentennio 1976-2005.

We explore how the underemployment problem of less-developed economies is related to income inequality. Consumers have nonhomothetic preferences over differentiated products of formal-sector goods and thus inequality affects the composition of aggregate demand via the price-setting behavior of firms. We find that high inequality divides the formal sector into mass producers and exclusive producers (which serve only the rich); high inequality generates an equilibrium where many workers are crowded into the informal economy; and an increase in subsistence productivity raises the unskilled workers ' wages and boosts employment due to the higher purchasing power of poorer households. (JEL D31, D43, E24, E26, J24) old idea in economics holds that a more egalitarian income distribution may be beneficial for aggregate employment through its effect on the composition of consumer demand. High purchasing power in the hands of the lower classes generates large markets that foster industrialization and the emergence of a massconsumption society. In contrast, high inequality may generate a large reserve army of labor stuck in agriculture or marginalized in urban areas. As a result, high ex ante inequality in the distribution of productive resources can be an obstacle to economic development. In this paper, we present a dual economy model with a modern (formal) sector and a subsistence (informal) sector in which income inequality becomes a crucial determinant of modern-sector employment. We focus on a novel mechanism largely neglected by the previous literature: the impact of income inequality on prices and mark-ups set by modern firms. The basic idea is that an unequal income distribution may induce some firms to set high prices and mark-ups and sell their products exclusively to rich consumers. Other firms set low prices, making their product affordable to the poor. We will call the latter firms "mass producers" and the former

We present a model of time allocation between formal and informal labour supply, where workers learn of informal job opportunities from their peers. In addition to formal income taxation and enforcement, individuals’ labour supply decisions depend on the number of their peers with informal jobs and the strength of social ties. Workers allocate more time to informal activities when tax enforcement is lax and job information transmission is good. More connected social networks (e.g., wheel, complete) feature lower average income but higher average utility than poorly connected social networks (e.g., star, empty). Average income may be non-monotonic in tax enforcement. On presente un modele d'allocation du temps entre l'offre de travail formel et informel dans le cas ou les travailleurs apprennent l'existence de possibilites de travail informel de leurs pairs. En plus de dependre de l'imposition des revenus formels et de la rigueur de ce processus, les decisions des individus dans leur offre de travail dependent du nombre des pairs qui ont du travail informel et de la force des liens sociaux. Les travailleurs allouent plus de temps aux activites informelles quand l'application de la loi fiscale est relâchee et que la transmission de l'information a propos du travail informel est bonne. Des reseaux sociaux mieux connectes (e.g., roue, complet) se traduisent par un revenu moyen plus bas mais par une utilite moyenne plus elevee que des reseaux sociaux plus pauvrement connectes (e.g. etoile, vide). Le revenu moyen peut avoir un lien non-monotone a la nature de l'application de la loi fiscale.

While a large body of researches discusses the effects of international subcontracting on firm dynamics, the present work deals with the similar issues of a domestic firm who subcontracts to the informal sector in a typical developing world. Theoretically, we develop a model that if the formal sector wage is higher than that of informal sector, the choice of informal sector subcontracting and in-house R&D investment appears to be alternative options to the firm to bypass expensive labour in the formal sector. We argue that the R&D and labour productivity in formal sector are highly influenced by the informal wage but not the formal sector one. Since the subcontracting can raise both supply and demand for informal workers due to a rise of formal sector wage, the movement of informal sector wage is uncertain and thereby, the formal sector R&D and labour-productivity are also ambiguous. Thus, countries with a vast segment of lowly-paid informal workers exhibit lowly-productive formal workers.

This paper develops a search and matching model of equilibrium unemployment, with on-the-job search, extended to both the informal sector and entrepreneurship. Three are the key features of this model: the entrepreneurial ability affects job productivity, all unemployed start their job search in the official sector, and workers employed in the informal sector try to move into the official one. Two key results emerge from the analysis. First: firms become heterogeneous in productivity, thus providing a new solution to the problem of finding an interior equilibrium where vacant jobs are allocated to both the regular and the hidden sector (the so-called ‘shadow puzzle’). Second: if the informal sector is sufficiently large, an increase in labour market tightness increases the unemployment rate and then the ‘vacancies-unemployment’ relationship (the so-called ‘Beveridge Curve’) switches from negative to positive.

According to financial analyzes conducted by the facilitated institutions, tax evasion is the main component of the underground economy matrix and one of the major crimes which generates "dirty money". The assessment of tax evasion is quite difficult. We may, in fact, talk about estimating the discovered or identified tax evasion (either as a share of GDP or as a share of tax revenues of the Consolidated national public budget - BGC); actually, the registered tax evasion is much higher. In this paper we have tried to highlight some of the causes and factors that determine and influence both tax evasion and some particularities of the registered Romanian tax evasion. Moreover, we presented the values determined for tax evasion identified during 2000-2010. Quality, long time considered like a mean, especially an industrial one, changed.

The labour market in Romania is faced with many problems such as certain demographic imbalances, legislative instability, a weak correlation between educational supplies with market demands and a rising of informal economy and informal employment. The paper aims to capture the labour market conditions in Romania in terms of informal employment in the current context. Informal employment in Romania cannot be understood without recognizing its diverse nature. There are presented some causes and forms of the informal employment in Romania in order to identify measures to reduce it.

This paper aims at defining, measuring and determining the effects of the underground economy. Consequently, it focuses on the specific aspects of every type of assessment method used in the specialty literature of this phenomenon and the possibility to apply them to the realities of the Romanian economy. Underground economy is a fact of life in the entire world, with clear signals of becoming more and more extensive, reaching remarkable dimensions and offering serious grounds for concern over the past few decades.

The Economic Recession, the Everlasting Bridge to the Informal Economy

This paper incorporates tax morale into a search and matching model of equilibrium unemployment, with on-the-job search, extended to both the irregular sector and entrepreneurship. Tax morale is modelled as a social norm for tax compliance which renders evasion costly. The moral cost of tax evasion (the strength of the social norm) is negatively related to the fraction of entrepreneurs that evades taxes. Precisely, if the relationship is non-linear, multiple equilibria may emerge, thus accounting for differences in-between regions and countries in the size of the irregular sector. The “good” equilibrium is in fact characterised, with respect to the “bad” one, by a smaller irregular sector and a stronger tax morale.

The history of mankind as a whole has proven that every time they appear and show major economic crisis, global exponential stage for development appear to various phenomena of crime, of poverty amid ancestral human population and the evil inclinations the detriment of his neighbor, for selfish economic advancement. And, as civilization develops, the same is climbing forms of the criminal manifestation of human potential. In the current economic crisis, organized crime knows a replay practices during the '30s economic crash, accompanied by absorption of "benefits" to the current technical discovery. In Romania, there is clearly upward trend in the field of organized crime, human trafficking, macroeconomic and financial crime, cyber crime and drug trafficking.

There is a worldwide contemporary debate about the role of the hidden economy in achieving the goal of sustained and inclusive economic growth and development, especially in the context of its spillover effects on the formal economy. For this purpose, policy makers and academicians have made concerted efforts to estimate the size of the hidden economy and to analyze its causes, issues and implications on key macroeconomic variables. However, there is a consensus among the policy makers that a better macroeconomic policy formulation and its true implementation are subject to the proper management of the associated issues of the hidden economy with suitable policy measures. In Pakistan, it is generally assumed that the hidden economy contributes about 30% to 50% to the overall GDP. The purpose of this paper is to estimate more precisely the size of the hidden economy with the determination of its potential causes and implications. Five statistical and structural modeling approaches namely; simple monetary approach, modified monetary approach using dynamic ordinary least square (DOLS), multiple-indicators multiple-causes (MIMIC) approach, electricity consumption approach and labor market survey based approach are used to estimate the size of the hidden economy and to analyze the characteristic nature of its growth over the period. The study also investigates the potential determinants of the hidden economy and various interrelated socio-economic issues in perspective of achieving national goal of inclusive growth and development. Finally, policy implications are provided consistent with pervading facts of the hidden economy in Pakistan especially in the context of the 18th Amendment and the 7th NFC Award.

Shadow economic activities constitute a large and growing part of all economic activity throughout the world. Because all individuals engaged in these activities wish not to be identified it is very difficult to get accurate information about the relationship between corruption and shadow economy activities. The paper highlights the interaction between the underground economy and corruption using comparative analysis. It discusses the theoretical approach to shadow economic activities and focuses on the determinants of the Romanian economy concluding that Romania record a high incidence of corruption and a large shadow economy.

Relying on the non-negligible role played by the underground economy in the labour market fluctuations, this paper extends the standard matching model à la Mortensen-Pissarides by introducing an underground sector along with an endogenous sector choice for both entrepreneurs and workers. These modifications improve the quantitative properties of the standard matching model, thus providing a possible explanation for the unemployment volatility puzzle.