Evaluation of the Shadow Economy Influencing Factors: Comparative Analysis of the Baltic States

Abstract

Numerous scientific and publicist articles consider the Baltic States as a single economic unit, particularly from the geopolitical point of view. However, evaluating the scope and spread of shadow economy, significant differences among the States emerge (Putniņis and Sauka, 2015; Schneider, 2014). With reference to Putniņis and Sauka (2015), the level of shadow economy in Latvia reached 23.5 percent of GDP in 2014 while that in Estonia and Lithuania respectively accounted 12.5 and 13.2 percent of GDP in the same year. The study carried out by Schneider (2014) proposes different results: in 2014, shadow economy in Lithuania and Estonia reached 27.7 percent of GDP while in Latvia it accounted 24.7 percent of GDP. The differences in the results are determined by the different methods engaged for the evaluation of the level of shadow economy. Nevertheless, it is obvious that the scope of shadow economy in the Baltic States far exceeds the average of the EU (18.5 percent of GDP). Thus, this article is aimed at the identification of the factors that have the biggest impact on the scope of shadow economy in all three Baltic States and performance of the comparative analysis of the identified factors. The methods of the research include systematic and comparative analysis of the scientific literature, regression, multiregression analysis and statistical data analysis. DOI: 10.5901/ajis.2015.v4n3s1p653