Size and determinants of shadow economies in the Baltic States

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Show simple item record Putniņš, TJ Sauka, A 2012-10-12T03:34:56Z 2011-09
dc.identifier.citation Baltic Journal of Economics, 2011, 11 (2), pp. 5 - 25
dc.identifier.issn 1406-099X
dc.identifier.other C1UNSUBMIT en_US
dc.description.abstract 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'.
dc.language eng
dc.title Size and determinants of shadow economies in the Baltic States
dc.type Journal Article
dc.parent Baltic Journal of Economics
dc.journal.volume 2
dc.journal.volume 11
dc.journal.number 2 en_US
dc.publocation Riga en_US
dc.publocation Newcastle, Australia
dc.identifier.startpage 5 en_US
dc.identifier.endpage 25 en_US BUS.Finance en_US
dc.conference Verified OK en_US
dc.conference Australasian Nonprofit and Social Marketing Conference
dc.for 1402 Applied Economics
dc.personcode 114967
dc.percentage 100 en_US Applied Economics en_US
dc.classification.type FOR-08 en_US
dc.edition en_US
dc.custom en_US en_US 2006-08-10
dc.location.activity en_US
dc.location.activity Newcastle, Australia
dc.description.keywords Estonia
dc.description.keywords Latvia
dc.description.keywords Lithuania
dc.description.keywords Shadow economy
dc.description.keywords Tax evasion
pubs.embargo.period Not known
pubs.organisational-group /University of Technology Sydney
pubs.organisational-group /University of Technology Sydney/Faculty of Business
pubs.organisational-group /University of Technology Sydney/Faculty of Business/Finance
pubs.organisational-group /University of Technology Sydney/Strength - Quantitative Finance
utslib.copyright.status Closed Access 2015-04-15 12:17:09.805752+10
pubs.declined 2015-04-17T16:41:03.994+1000
utslib.collection.history Closed (ID: 3)

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