INSTITUTIONAL DETERMINANTS OF SHADOW ECONOMY IN EU COUNTRIES: A PANEL DATA ANALYSIS

The aim of this paper is to identify the institutional factors that determine shadow economy European Union level and to group the member states into clusters using shadow economy and the institutional factors as variables. Shadow economy, a serious enemy of economic development, with unknown dimens...

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Bibliographic Details
Published in:TRANSFORMATIONS IN BUSINESS & ECONOMICS 2014-01, Vol.13 (3C), p.483-495
Main Authors: Iacobuta, Andreea-Oana, Socoliuc, Oana Ramona, Clipa, Raluca Irina
Format: Article
Language:English
Subjects:
Cluster analysis
Data analysis
Economic development
Europe
European Union
Extremists
Freedom
Informal economy
Institutionalism
Panel data
Studies
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Summary:The aim of this paper is to identify the institutional factors that determine shadow economy European Union level and to group the member states into clusters using shadow economy and the institutional factors as variables. Shadow economy, a serious enemy of economic development, with unknown dimensions and unpredicted evolution, does not develop in a vacuum but in an institutional framework which has a significant role in explaining its dimensions. The research methods used in this paper are panel data analysis and cluster analysis. The results point out that the level of shadow economy is lower in countries with higher government effectiveness, regulatory quality, business freedom, fiscal freedom and labour freedom. Regulatory quality, government effectiveness and shadow economy were the most important variables in dividing EU countries into three main clusters. The main conclusion is that in order to diminish the level of shadow economy we have to increase institutional efficiency.
ISSN:1648-4460
2538-872X