Estimating the Shadow Economy in Bulgaria: Survey Evidence for 2023

The article aims to present the results of an up-to-date independent study of the hidden economy in Bulgaria. It was carried out between November 2023 and February 2024, as a survey among business representatives in the country through a representative sample of 335 enterprises. The main results show that the estimated share of the hidden economy in the total sales volume is between 26% and 50%, the highest in the construction sector, catering, and tourism. Most often, these practices are associated with manipulation of the financial statements and the employed workforce for which they are favorable conditions mainly due to corruption, crime, and impunity followed by unfair competition and a lack of incentives for private business development.

Analysing agricultural policy reforms under transition in Bulgaria

The presented paper makes the analysis of differences and similarities between social entrepreneurship and corporate social responsibility. It describes the practice of business sector involvement in solving social issues on the example of two different forms of entrepreneurial activity (traditional and social entrepreneurship). The paper reviews in detail the features that characterize social enterprises and responsible businesses, and analyzes the importance of business involvement in solving social issues. The comparison method was used for the study, which focused on the research of social enterprises and corporate social projects. Specifically, social enterprises and social projects implemented by business firms with similar goals in the same geographical zone were selected and compared to each other. The study of the targeted social enterprises reveals that it is entirely possible for a company to achieve commercial and social goals with equal success. As a result, they can contribute to the resolution of social issues such as environmental protection, the employment of vulnerable and underprivileged groups in the open labor market, the development of innovative technologies, and others. Simultaneously, the study confirms that, given their nature, motivation, and goals, responsible business and social entrepreneurship have the full potential to exist and develop independently in the market. Social stability is a key indicator of success for any country, regardless of its social and economic development. Social issues play an important role in the formation of the business environment, on which opportunities for business growth and development highly depend. In the modern world, the role of business in solving social issues is significantly growing, a clear example of which is the UN's "2030 Agenda for Sustainable Development". These goals are of universal importance and represent the highest level of international efforts to ensure that we and future generations live on a more sustainable, safe, and secure planet. The business sector is one of the main stakeholders in the process of implementing sustainable development goals, which should contribute to the recovery of the economic environment. Companies in Georgia have varying opinions on the topic of business involvement in social issues. 34 out of 92 surveyed companies view corporate social responsibility as a capital investment, which can play an important role in attracting foreign investment, and 19 of them think that examples of company participation in social issues are influenced by emotional factors and are driven by spontaneous decisions. According to the same companies, social issues are outside the scope of activities of the business sector and are not a subject of their interest. It is evident that examples of business involvement in social projects are mostly observed in large corporations. At the same time, there is a growing trend of social entrepreneurship in Georgia. Since 2009, when the first social enterprises appeared, 66 businesses haven been identified as social enterprises. Social companies are crucial allies for the government and society, and contribute significantly to tackling pressing problems such as poverty alleviation, access to livelihoods, preservation of cultural heritage, environmental protection, health care, education, and others. That is why, social entrepreneurship, as a socio-economic and organizational phenomenon, has attracted the attention of scientists, representatives of business and government in recent years. Although social entrepreneurship differs from traditional entrepreneurship in terms of content, without in-depth knowledge, it is difficult to draw a line between a social enterprise and the enterprise that implements corporate social responsibility initiatives, which is further complicated by the unregulated legal framework of social entrepreneurship. Taking into account the aforementioned factors, the goal of the conducted study was, on the one hand, to gather information about the activities of social enterprises operating in Georgia, and on the other hand, to analyze the initiatives implemented by business companies under the umbrella of corporate social responsibility. Based on the information gathered, the similarities and differences between the two types of business involvement in social issues were outlined. The study also aimed to evaluate the prospects for the development of social entrepreneurship in Georgia. In the process of the study, desk and qualitative methods were used. Primarily, previous studies and literature were examined. Two focus group meetings were held as part of the qualitative research, one with representatives of traditional businesses that implement social projects and the other with social enterprises operating in Georgia. In order to illustrate the similarities and contrasts between the modes of their activities and the outcomes attained, social initiatives carried out by regular businesses and social enterprises were grouped based on similar content and scope. Due to the fact that social entrepreneurship in general and its development potential have not been thoroughly and widely researched at the academic level we will continue the research of the topic. In the following papers, the role of social entrepreneurship in solving the country's economic and social problems will be analyzed in more detail and the effectiveness of the model will be evaluated, particularly with regard to employing a diverse workforce. Keywords: Social entrepreneurship, a social enterprise, Corporate Social Responsibility, Business Social Responsibility, Responsible Business JEL Codes: L26, L32, M14

GDP accounts are customarily compiled in several alternative ways, each aggregating transactions in different ways, but all (at least in theory) adding to the same total. Two of the most common aggregations are that focused on expenditures (based on the standard national income accounting identity of C + I + G + X - M) and that based on revenues, or incomes. The two methods should, of course, add to the same number since they measure different sides of the same activity: what money people receive on the one side, and what they do with it on the other. However, Bulgarian GDP statistics using the revenue approach give growth rates 2 percentage points lower than the expenditure approach for 1998 and 1999. In other words, data based on what people actually spend show growth rates of 5.4% (1998) and 4.4% (1999), while official figures based on revenues are 3.5% and 2.4%, respectively. This can be interpreted as evidence that there are underreported incomes. It is of interest not only for statistical but also for economic policy purposes to have more detailed information about the discrepancies between official statistics and activities not covered by the official statistical system. It is particularly interesting to know the size and structure of unreported, hidden economic activities, or what has come to be called the “shadow economy.” Currently published estimates of the size of the shadow economy vary from 20 to 25% of officially measured GDP, implying that this is a far larger issue than that implied by the differential growth rates cited above. The objective of this study is to estimate the size of the informal sector, its structure, and the dynamics of its development since Bulgaria ended its long standing centrally directed command economy. Different methods were used to get results that are compatible for international comparisons; also, alternative calculations allow a range of estimates which can help to balance the methodological weaknesses of the individual approaches. The basic rationale of Physical Input Approaches to measuring the size of the shadow economy is that energy consumption (electricity, plus other sources) in a given country is proportional to total economic activity and any change in energy consumption which does not correspond to changes in the measured total activity level of the country indicates a change in the size of the shadow economy. These results provide useful indicators of changes in the shadow economy over time, but cannot be used to quantify its absolute size since this depends on an initial estimate of its size in the base year. This estimate is necessarily arbitrary to some degree in the absence of specific micro-level data allowing definition of an explicit relationship between energy use and economic activity. Results show that the Bulgarian shadow economy in 1998 declined below the estimated base year (1989) share of 30%. According to our calculations the share of the shadow economy in 1998 GDP in Bulgaria was 22%. The largest shares were observed in 1990 (32.2%) and 1996 (34.4%), declining thereafter. This study has shown that though the size of the shadow economy has declined from its peaks in the mid 1990’s, it remains a sizable portion of the Bulgarian economy. While in many ways shadow activities have the potential to be dynamic growth sectors, bringing them into official economy would help spread the burden of social programs more broadly. Our results show that a substantial portion of the response to policy initiatives is effectively hidden from official view. Thus, an ability to correctly estimate the size and structure of the shadow economy will not only provide more accurate statistics but can help improve growth policies as well.

Shadow economy is a persistent and characteristic phenomenon of the economy of Eastern Europe. The article aims to study the shadow sector in several countries – Bulgaria, Greece, Romania and Croatia, presenting unpublished data on its perceived manifestations from the point of view of demand and supply. The data used is from a Eurobarometer survey conducted in 2019. The information provided is up-to-date and relevant to the study of shadow economy, due to the relatively constant behavior of economic agents and the lack of analogous recent survey that examines informal activity in such details, allowing comparative analysis with other European countries. The declared behavior of the respondents is examined and statistical tests are employed to indicate statistically significant differences between the mean values of the four countries regarding the performed paid undeclared activities and the purchase of goods from the shadow sector. The research specifies the sectors most affected by undeclared activities – in Bulgaria this is construction. The reasons for participation in the shadow economy from the supply and demand side are analyzed. The results reveal the pragmatism of Bulgarian respondents in comparison to the motivation of respondents in the other three countries. The most common paid undeclared activities are also indicated, as well as the most frequently purchased goods and services from the shadow sector. The material builds on the current knowledge on the subject and provides a starting point for the refinement of policies to combat shadow economy.

Covid-19 is considered one of the major natural disasters ever in history that adversely affect the social, political, and economic activities throughout the world. Covid-19 also affects the welfare and well-being of the people by suffering the income earning activities that are directly or indirectly related to the business sector. Therefore, this study investigated the impact of Covid-19 on the business sector in three main markets namely; Saddar Market, Khyber Bazar Market, and Karkhano market in District Peshawar. The collected data was firstly analysed for reliability through Cronbach’s alpha test and then the normality test is applied. After analysing and finding the data reliability and normality, the correlation test is applied and the findings show the robust inverse relation between the Covid-19 pandemic and the business sector in the studied markets. Moreover, there is also a strong correlation exists between employment and the business sector. Further, the Ordinary Least Square regression technique findings indicate the inverse and significant effect of Covid-19 on the Business sector. The study also found an imperative effect of employment on the business sector and adversely affecting employment during Covid-19 definitely effect income and business activities not only in studied area but in overall markets. Keywords: Business Sector, Covid-19 pandemic, Employment, District Peshawar.

Covid-19 is considered one of the major natural disasters ever in history that adversely affect the social, political, and economic activities throughout the world. Covid-19 also affects the welfare and well-being of the people by suffering the income earning activities that are directly or indirectly related to the business sector. Therefore, this study investigated the impact of Covid-19 on the business sector in three main markets namely; Saddar Market, Khyber Bazar Market, and Karkhano market in District Peshawar. The collected data was firstly analysed for reliability through Cronbach’s alpha test and then the normality test is applied. After analysing and finding the data reliability and normality, the correlation test is applied and the findings show the robust inverse relation between the Covid-19 pandemic and the business sector in the studied markets. Moreover, there is also a strong correlation exists between employment and the business sector. Further, the Ordinary Least Square regression technique findings indicate the inverse and significant effect of Covid-19 on the Business sector. The study also found an imperative effect of employment on the business sector and adversely affecting employment during Covid-19 definitely effect income and business activities not only in studied area but in overall markets. Keywords: Business Sector, Covid-19 pandemic, Employment, District Peshawar.

With increasing competitiveness of companies and business sectors in the domestic markets of Lithuania, economic units are frequently confronted with the lack of methods for more detailed analysis of external factors explaining the variation over time of corporate financial indicators. The analysis or forecasting of financial indicators is usually linked with the development of a stock market or undertaken to estimate the probability of bankruptcy. However, there is a lack of studies aimed at identifying links between macroeconomic factors and financial performance indicators and explaining their variation over time. To serve that purpose, the factors of the macroeconomic environment that are most significant for certain economic activities have been identified and analysed to enable explaining the variation over time patterns of corporate financial indicators. The analysis covers economic performance, i.e. financial performance indicators and their links with macroeconomic factors, in 89 business sectors of Lithuania at a three-digit level of NACE 2 ed. The findings of the research indicate that the unemployment level in the country, the volume of export and import and the GDP are the most important macroeconomic factors that can be used to forecast different profitability, financial leverage, liquidity and other financial performance indicators of individual business sectors or companies. The research has not unfolded any significant differences between business sectors therefore the above factors are considered generic macroeconomic factors enabling to explain financial performance indicators of the 89 business sectors. Hence, special attention has to be paid to identifying and analysing specific factors and assessing the causal link. When established, the set of such factors provides a framework for building of a model to forecast business sector financial indicators.

The shadow economy phenomenon is widespread and has detrimental effects on the business sector and the national economy. The philosophy of shadow economy involves complex and overlapping perceptions related to conducting legal as well as illegal businesses. The shadow economy is not a new concept but one that has existed since the first known system of tax levies, and that has spread throughout the developed and developing countries of the world in equal measure. Shadow economy is often associated with illegally-gained proceeds (dirty money) originating from unethical and unlawful small businesses such as sexual slavery/exploitation and the drug trade. It is considered as detrimental to national economies and is rapidly spreading globally in the modern era. Weak, poorly designed or implemented controls by some countries, in addition to administrative corruption, have significantly contributed to the emergence and spread of shadow economies. The expanding scale and growth of shadow economies comes in spite of international efforts to enforce laws and regulations on this issue. The phenomenon has continued to spread despite global efforts to create and increase public awareness on the issue and notwithstanding dissemination of information to increase knowledge of the risks arising from this phenomenon and its economic impacts. Based on the severe threats shadow economies constitute and their effects on economic and social order, the subject has been recently included in the syllabus and course design of international as well as Arab universities. Legitimate and illegitimate business owners and individuals engage in shadow economies, whereby they attempt to evade payment of state taxes by benefiting from widely pervasive administrative corruption.

This paper aims to explore the use and impact of mobile telephony on the performance of companies in developing countries, through a nationwide survey comprised of thousands of enterprises representing a true sample of the business sector in Palestine. This paper complements studies that make the linkage between mobile communications and economic activities at micro or enterprise level. It analyses the adoption patterns and rational behind these patterns as revealed by the business owners and managers of Palestinian enterprises. Porter's value chain is used as a framework to assess the impact of mobile telephony in work processes.The survey covered thousands of enterprises of all sizes and economic activities, selected to embody a representative sample of the Palestinian business sector. It further explores the views of the owners and managers of these enterprises regarding the use of ICTs. The study reveals that mobile phones have meaningfully enhanced internal processes and the overall value chain. Most notably, mobile phones were effective in bridging the information and connectivity gap businesses in developing countries ordinarily suffer.The study has also found that small and micro enterprises gain from the use of mobiles the same as what large enterprises do, especially in mainstream operations like marketing and sales, information flow, and provision of customer services. This is happening at the time when there is a huge difference in resources between the two categories of enterprises. The study came to conclude that mobile benefits are not favoring one business sector from the other, in the sense that all business sectors are capable of tailoring mobile phone services to suit their needs.

In this article, we intend to describe how the increased supply of graduates with a master's level education in humanities, law, economics and science and technology (S&T) are being utilised in the knowledge society. We compare employment for graduates in 2005/07 with employment for graduates in 1989/91, according to economic activity, sector and to some degree occupations (information-related occupations). We also give an indication of the competence level in these different work areas by looking at the level of wages. In the analysis, we have only included graduates who thought that they had made some use of their education. The results show that the main bulk of the increased number of graduates has been absorbed by knowledge-intensive economic activities. Especially important were the typical business sector economic activities, such as “professional and technical services” and “information and communication”. Of the growth in recruitment, 43 % occurred within these two economic activities, where the wage level was higher than that in higher education (HE), R&D and public administration, indicating that the skill level is no lower than in these economic activities. Also, other types of knowledge-intensive service activities had a large increase in recruitment, and in 2005/2007, such economic activities recruited 44 % of graduates. While recruitment to the traditional academic sector, the education system, research and development, and public administration also accounted in total for a considerable part of the increased recruitment, the proportion of graduates being employed in these economic activities was significantly reduced. The proportion of graduates working in low-skill economic activities remained roughly the same. The business sector absorbed three quarters of the growth in the supply of graduates. Finally, using information on occupation, the analysis also shows that one third of the growth in recruitment consisted of information-related jobs in the information sector or elsewhere, generally considered to be high-skilled work.

Research to date on the shadow economy in South Eastern Europe and beyond has mainly focused on macro assessments of this phenomenon or on the socio-economic characteristics of individuals involved in these activities. There have been far fewer studies analysing the characteristics of businesses engaged in the shadow economy and the factors that drive them to operating informally. This chapter provides an analysis of the shadow economy in the business and entrepreneurial sectors using data from the Survey on Conditions for Doing Business in Serbia. This analysis is based on three indicators: (1) the share of business entities engaged in the shadow economy in the total number of business entities; (2) the share of informal workers in the total number of workers, both overall and by type; and (3) the share of cash payments in the total volume of payments. In addition to descriptive statistics that show how the shadow economy varies by key factors, the chapter provides econometric analysis identifying specific factors that are statistically significant in a company’s decision to take part in the shadow economy.KeywordsInformal SectorShadow EconomyInformal EconomyInformal ActivityCash PaymentThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Measuring Underground (Unobserved, Non-Observed, Unrecorded) Economies in Transition Countries: Can We Trust GDP?

Measuring underground (unobserved, non-observed, unrecorded) economies in transition countries: Can we trust GDP?

Shadow economy is very common in the modern economy and inherent in any state, regardless of its level of socio-economic development. 
 The underground economy refers to economic transactions that are deemed illegal, either because the goods or services traded are unlawful in nature, or because transactions fail to comply with governmental reporting requirements.
 Also called the underground, informal, or parallel economy, the shadow economy includes not only illegal activities but also unreported income from the production of legal goods and services, either from monetary or barter transactions. Hence, the shadow economy comprises all economic activities that would generally be taxable were they reported to the tax authorities.
 A precise definition of the shadow economy, however, is quite difficult because the shadow economy develops all the time, adjusting to changes in taxation and regulations.
 Shadow economy is a complex phenomenon that has become significant in Ukraine. This phenomenon in Ukraine is one of the main barriers to European integration, increasing competitiveness in the world market, improving living standards within the country. The presence of a shadow economy indicates the activity of illegal economic activity in the country, a high level of corruption in the public sector, a low level of legal and tax morality in society. Ukraine still has a significant volume shadow economy, which significantly impairs the socio-economic development of the state. Shadow economy has become one of the most acute economic and socio-political problems in Ukraine and poses a threat to the economic and national security of the state. 
 The shadow economy is present unevenly in different sectors of the economy. Determining the level of the shadow economy allows the government to identify which sectors have to be given priority.
 The work based on the analysis of a significant array of analytical and statistical material. The problem of a significant level of shadowing of the economy in Ukraine is considered. The article describes the method of calculating the level of the shadow economy and compares the levels of the shadow economy in Ukraine from 2010 to 2020.
 Authors study the causes and consequences of shadowing a country's economy and describe possible ways to overcome the negative phenomenon.