Shadow Sector Research Articles

Влияние теневого сектора экономики на поведениегетерогенных агентов

Влияние теневого сектора экономики на поведениегетерогенных агентов

РЕФОРМУВАННЯ ПОДАТКОВОЇ СИСТЕМИ ЯК ЧИННИК ЗАБЕЗПЕЧЕННЯ ФІНАНСОВОЇ БЕЗПЕКИ УКРАЇНИ

This article identifies the relevance of proactive state policy aimed at increasing the competitiveness of the Ukrainian economy, improving the indicators of economic and financial resilience and resilience of the national economy to potential threats; The interconnection between the tax system and financial security of the country was disclosed; problems of Ukraine's tax system that pose serious threats to the national security of the state, its economic and financial sovereignty were outlined. It also describes the basic principles of building an effective tax system and variants of their implementation in successful countries. Special attention is paid to the process of formation of the tax system of Ukraine, which has determined the specificity of today's gaps in its financial security. The significant part of the work is devoted to the concrete problems of the tax system of Ukraine: Economic inefficiency and social injustice of the country's taxation, a large part of the shadow sector of the economy and "shadow power", low culture of tax lawmaking and lack of consistent comprehensive reform of the tax system for 30 years of Independence, mainly fiscal nature of taxes, unreasonable, non-refundable, unfair and counterproductive system of tax payments, etc. The article also characterized the way in which the mentioned problems of the tax system essentially worsen the state of national security of the state and described why the tax system of Ukraine requires a thorough, profound, scientifically based and complex reforming. We confirm that this reform is necessary in view of the fact that the social inefficiency of Ukrainian taxation is a strategically dangerous problem for the defense of the country. While it will take a long time to develop a sound integrated inter-sectoral reform, the policy changes outlined in this paper must be pursued in parallel in order to enable the system to function properly in its current state. The study was conducted using mainly general scientific theoretical methods.

Measuring Poverty: An Interval Based Composite Indicator Approach

The measurement of the poverty is a fundamental theme in Social Science. Poverty as a multidimensional concept can be measured by means of composite indicators which are relevant for their capacity to synthesize complex statistical information. However, these indicators could be affected by subjective choices. In order to avoid the problem, we propose interval based composite indicators which allow, in this context, to obtain robust and reliable measures. In particular, we will consider all the different factors identified on the basis of a relevant conceptual model of the poverty, we have identified. Then we will compute a different composite indicator considering a different random configuration of the different factors. At the end we are able to obtain a different interval for each region based on the different factor choices. In this sense, we will construct an interval based composite indicator based on the outcomes computed. The different intervals can be compared and different rankings for poverty can be obtained. In fact, the poverty interval composite indicator can be considered and compared for their parameters like centre, minimum, maximum and range. The results show a relevant and consistent measurement of the indicator, but also a relevant impact of the shadow sector on the final measures.

CAPITAL IMPLICIT EXPENSES IN THE SHADOW ECONOMIC REVENUE

In many countries related to emerging markets (EM), there is a high proportion of the shadow economy. The main source of shadow incomes replenishment are incomes that are actually generated in the official sector of the economy, however, they are withdrawn to the shadow segment. The article is dedicated to solving the actual task of income amount estimating that flows from the official sector of the economy to the shadow one. The paper shows that the amount of annual profits that "poured" into the shadow sector corresponds to the size of the hidden (implicit) payment for capital. The problem of shadow payment for capital is closely connected with the shadowing of profits, salaries and payments for the resources usage.
 The causal relationship between risk premium, shadow economy and key macroeconomic parameters of individual countries are shown in the article. The average income to GDP per capita ratio in Ukraine and other EM countries is significantly lower than in developed countries. In addition, there is a low share of staff costs in the structure of costs of enterprises. Thus, in the EM countries, the orientation of the business to the interests of the shareholders is clearly manifested and the interests of the stakeholders are ignored. In emerging markets, an increase in risks primarily leads to an increase in the risk premium and the shadowing level, to rising prices and to a substantial reduction in real salaries.
 For the estimation of real capital expenditures, it is advisable to use indirect methods, especially modification of capital assets pricing model (CAPM), adapted to the conditions of the EM. The proposed modification (hybrid crisis model) involves minimum usage of the data from the local financial market. It includes the following parameters: global risk-free rate of return, global market premium for risk, country risk premium, beta-factor, calculated on the basis of the analogue approach, and premium for specific risks of investing in a particular asset. According to our assumption, the shadow interest rate on capital is the difference between the expected return by CAPM and the averaged ROE that follows from the official reporting. Thus, the size of annual profits, "transferred" into the shadow sector, corresponds to the size of the implicit capital charge. The calculations made have showed a stable relationship between the level of country risks and the size of shadow revenues in the country.

Macroeconomic and structural properties of the Russian labor market: A cross-country comparison

Abstract We suggest a new way to identify salient features of the Russian labor market. Parameters of basic macroeconomic models pertinent to the Russian labor market are compared to a sample of other countries. We find that estimated values of Okun's coefficient and the elasticity of real wages to labor productivity in Russia are typical for emerging markets. What really distinguishes the labor market is that the elasticity of real wages relative to unemployment in Russia is very high by international standards. The overall conclusion is that the Russian labor market can be characterized by a combination of serious structural problems (such as low employee mobility, the significant size of the shadow sector, etc.) and solid macroeconomic performance, verified by the persistently low rate of unemployment in recent years.

SYSTEMATIZATION OF TAX STRATEGIES FOR SHADOW ECONOMY PREVENTION UNDER CONDITIONS OF GLOBALIZATION

The article studies main theoretical and practical aspects of the shadow economy functioning in the national and international environment. Levels of economic processes shadowing in European Union countries were grounded. A shadow sector volume in developed countries of the world was studied, and the international practice of economy de-shadowing was systematized. In the process of the study the essential attention was paid to fiscal instruments of shadow schemes prevention. Tax strategies of a fight against factors and motives that generate and intensify the shadow economy level in Ukraine were generalized on this base. It was proved, that there is practically no distinct panacea for the Ukrainian economy in the context of its de-shadowing. But the state is completely able to diminish shadow schemes diffusion in the economy using tax mechanisms. According to the results of the study the offers as to the shadow economy prevention in Ukraine were formulated on the base of the international experience and tax instruments.

Financial monitoring of the port industry companies on the basis of risk-oriented approach

The paper determines that the need in financial monitoring of Ukrainian companies of the port sector is caused by financial consequences related to the need to protect the environment, the existence of a dominant part of payments in foreign currency (foreign exchange risk associated with currency fluctuations), the possibility of cash outflows into the shadow sector of the economy and the possibility to use transport for smuggling. In addition, in the recent years there is a tendency of diminished financial stability of the seaports of Ukraine, which is a signal to determine the factors that have an impact on this situation, the consequences of risky operations and the optimal structure of sources for the formation of assets. An important aspect of financial monitoring is the necessity to identify the data about the objecton the basis of insignificant and relevant information, which makes it possible to avoid non-essential features and parameters and to speed up the decision making process at the lowest cost of expenditures and time. The study offers a methodical approach to financial monitoring of the port industry companies on the basis of the risk-based approach that takes into account the conditions for the functioning of port companies and their business characteristics, making it possible to implement the appropriate measures to prevent and avoid risky financial transactions and, consequently, to increase/preserve the competitiveness of the port sector companies. Regarding the need in further studies of the practical realization of financial monitoring of the port sector companies, there is a choice and substantiation of aggregate indicators of the financial monitoring system, their listing with a view to specific features, types and scale of activities.

Overhauling China’s Financial Stability Regulation: Policy Riddles and Regulatory Dilemmas

AbstractChina faces a number of important financial-stability risks. A persistent feature of the Chinese banking sector is the rapid formation of non-performing loans (NPLs) during each business cycle. Moreover, lending restrictions and interest-rate caps (“financial repression”) have, in part, given rise to an ever-expanding shadow-banking sector. The article highlights five cardinal sins within the Chinese financial system: (1) bad lending practices by the regulated sector, (2) lax governance, (3) a shadow-banking system that is dominated by short-term claims with no liquidity backstop, (4) stark lack of transparency in the shadow sector, and (5) very high levels of interconnectedness between the shadow and the regulated sector. The article suggests that some of these problems will be alleviated through a regulatory big bang that would abolish the current silo approach to financial regulation streamlining financial stability and conduct/consumer-protection supervision. Furthermore, we recommend the introduction of a binding and all-encompassing leverage ratio that will require banks to hold much higher capital buffers as a means to boost bank resilience, reduce NPLs, and battle interconnectedness with the shadow sector.

Drivers of the Underground Economy Around the Millienium: A Long Term Look for the United States

This paper provides a long term analysis of the determinants of the shadow economy. Using data for the United States over the years 1870–2014 we examine economic and political factors driving the underground sector. Results show that among the economic factors, greater economic prosperity increased the shadow sector, while greater openness to trade and a bigger government reduced it, with the effects of inflation being statistically insignificant. Politically, the efficacy of presidential vetoes and the effect of congressional party homogeneity are statistically insignificant. Further, the U.S. shadow economy increased during both world wars, but was lower during the great depression. However, in the short run, the relationship between the shadow economy and its determinants exhibit some remarkable differences.

THEORETICAL ESSENCE OF ECONOMIC CATEGORY «ECONOMY UNSHADOWING»

The world's issue of the shadow economy gained the particular actuality during last decade. This topic is also close to Ukraine, as the share of the shadow sector in the domestic economy is quite significant. The term "economy unshadowing" is often met in Ukrainian scientific articles, but its definition has not been given yet. At the same time, this category has never been seen in foreign economic literature. Such a paradox has set the goal of this article. The exploration of existing approaches to the definition of the economic category "economy unshadowing" and the formation of the author's interpretation of its essence, taking into account Ukrainian and foreign experience have become the main tasks of this research. The theoretical basis of the shadow economy has been analysed. The author's interpretation of its essence and structure has been provided.

Micro-neoliberalism in China: public-private interactions at the confluence of mainstream and shadow education

With its shift to a market economy gathering speed from the 1990s, the Chinese Government embarked on an agenda that brought neoliberal forces into almost all sectors including education. The policies underpinned China’s spectacular economic growth, but in education have had consequences that arguably are problematic.Drawing on a mixed-methods study in Shanghai, this paper examines ‘micro-neoliberalism’ in China’s education system, i.e. privatization and marketization at the individual, family, and institutional levels, with focus on blurring boundaries between public schooling and private supplementary tutoring. Some dimensions of these processes resulted from deliberate macro-level policies to decentralize control of schooling, raise performance, and empower private education. Other dimensions arose from the market behavior of individuals, families, and institutions that countered government efforts to steer parental choice of schools and to reduce disparities between schools. Education policies are enacted not only in schools but also in the shadow sector which is commonly overlooked. This paper focuses on Shanghai but has implications for other parts of China; and since shadow education is expanding as a global phenomenon, it also has relevance to many other countries.

RESEARCH METHODOLOGY FUNDAMENTALS OF THE UKRAINIAN PROCESSING AND MANUFACTURING ENTERPRISES ECONOMIC POTENTIAL

The purpose of the paper is to find the most appropriate application ways for simulating of the business activities of the manufacturing and processing agriculture enterprises dealing in the corruptive Ukrainian environment and to overcome the fundamental methodology contradictions to be able to perform more accurate results of the economic potential assessment despite the sophisticated defects inherent in current industry sector. Methodology includes publication research, interviews and practical comparison of the published statistic data and real production volume, returns and other indicators to be able to estimate actual potential of the target enterprises. The paper comes through the classical analytical methods showing their application pros and contras in highly corruptive environment with the strong trend of data falsification. Results of the survey show the basic economic methods applicable for the research activity of processing and manufacturing enterprises operating in the field of agriculture. The authors’ experience picks up the problem of the urgent need of new methodology among vast abstractive researching executed by the majority of the scientists as they have some contradictions when we apply them for the real industry segment or even an enterprise. Corruption affecting the general statistic data misrepresents the facts therefore current (classic methods) are not able to show real economic trends in the industrial segment. So the authors persist on the significance of the corruption distortion considering e.g. to identify the actual macro- and microeconomic indicators, indexes and ratios we involve the stage researching system of multidimensional comparative analysis to rank received rating and find appropriate position for enterprise and as we cannot ignore a constantly growing shadow sector of Ukrainian economy we perform economic potential assessment of the target enterprise with the identification of the shadow sector with the help of the offered in the paper formula. This set of the mentioned above tools allows us to estimate the influence of the inner and outer environment influence into the researchable object and show the actual phenomena trends. Another benefits of the offered ranking system is involving of several scientific approaches (every approach obtains its own pros and contras) so if they deal together we increase our accuracy. Practical implications. Ukraine has been being independent over a quarter of a century and unfortunately corruption has penetrated into each and every sphere of social and economic life including agriculture and due to the a great deal of fabricated data leading domestic scientist to study the macro- microeconomic state and processes mostly from the abstractive point of view. Therefore the methodology clarification and algorithm of the analytical method application estimate the target enterprises’ economic potential more accurate. Value/originality. Considering the identification of the shadow industry sector (the volume Ukrainian scientists cannot ignore) we may avoid dramatic mistakes in researches defining macroeconomic indexes, other economic and financial options.

Рациональность экономического поведения при выборе осуществления предпринимательской деятельности в теневом секторе

Борьба с уклонением от уплаты налогов, теневой экономикой и нелегальной занятостью стали важнейшими целями социально-экономической политики во многих странах мира в течение последних десятилетий. В настоящей работе проанализированы причины теневой экономики с позиции предпринимателя, выбирающего наиболее выгодные условия для осуществления экономической деятельности. Сделан вывод о том, что сложное и запутанное регулирование вредит бизнесу вместо того, чтобы способствовать общественной безопасности. На основе структурного уравнения рационального выбора экономическим агентом теневого или официального сектора и анализа причин теневой экономики предложены рекомендации по снижению масштабов теневых процессов и совершенствованию условий для осуществления предпринимательской деятельности в официальном секторе..

Casting a Long Shadow? Cross-border Spillovers of Shadow Economy across American States

This article examines the determinants of the shadow economy across American states, with emphasis on cross-border spillover effects. Results show positive spillovers of shadow activities across state borders with different specifications. In other effects, greater unionization in a state induces businesses to go underground, while states without a sales tax had a smaller shadow economy, ceteris paribus. Greater state product checked shadow growth, with military and nonmilitary state products having opposite effects. Finally, states bordering Canada and Mexico had different flows from the shadow sector.

External effects of international labour migration

In the article deals with analysis approaches of native and foreign researchers to the impact of international foreign worker on economies of donors and recipients labour resources , and significantly that such an impact on the level of the world economy is positive, it contributes to the GDP. The article substantiates that at the level of national economies, this effect is ambiguous and alternate. The economy of the recipient workforce singled out such important positive effects: an increase in workforce in the economy, output growth, of the internal market; additional receipts of intellectual capital and knowledge in the economy, and others. However simultaneously previously mentioned international foreign worker leads a number of negative effects in the economy of recipient : increasing budget burden by strong and traps unemployment; growth of shadow sector of economy; additional costs at neutralization increasing social tension and criminalization. The economy of the donor can highlight the following important positive effects of international labor migration, reducing stress on the local labor market; investment in education of potential migrants; reducing unemployment; reduce the budget burden due to unemployment benefits and other low cost. The largest negative effects in this case are brain drain technological lagging reducing GDP, inflation may in the case of large external benefits transfers. Developed graphical model the impact of international Labour Migration on the economies of donor and recipient workforce. A formula for determining the impact of international migration on the performance of the economy donor countries, from which you can see the change in GDP in the country – exporting workforce due to international migration.

Shadow Economy as a Self-Adjustment of Poverty and a Signal from Invisible Hand

The article determines the necessity to consider shadow economy as an indicator of required essential changes.Shadow economy serves as a methodological tool for evaluation of consumer needs and real potential of anational economy and business, as well as a tool that exposes underdeveloped national laws regulating economicactivities. The latter is possible because built up layers of unnecessary laws that prevent business freedom,excessive interfering of government regulation with a national economy, and contradictory bureaucraticprocedures impact developing of shadow economy. It was proved that one of the tools for overcoming shadoweconomy is the development of small business. As a rule, the reasoning behind operating business in the shadowsector involves inadequate obstacles on the way of entering legal and registered market, high taxes, andcorruption. However, people have no protection, and their risks are too high in the shadow sector.

Assessment of Influence of the Labor Shadow Sector on the Economic Growth of the Russian Economy with the Using Methods of Statistical Modeling

The informal sector became an independent segment of a labor market and has essential impact on social and economic system as a whole. Research of dependence of economic growth on indexes of changes of labor shadow sector in the Russian economy is presented in article. The results, which were received within regression model, showed that there is a significant dependence of the gross domestic product dynamics on dynamics of employment and salary indexes in shadow sector. As a whole the shadow economy makes ambiguous impact on economic development. The main efforts of Russian government should be aimed at the development of economic institutes, improvement of efficiency of the employment policy and the income policy, legislation and taxation improvement.

Fiscal consolidation with tax evasion and corruption

Cross-country evidence highlights the importance of tax evasion and corruption in determining the size of fiscal multipliers. We introduce these two features in a New Keynesian model and revisit the effects of fiscal consolidations. VAR evidence for Italy suggests that spending cuts reduce tax evasion, while tax hikes increase it. In the model, spending cuts induce a reallocation of production towards the formal sector, thus reducing tax evasion. Tax hikes increase the incentives to produce in the less productive shadow sector, implying higher output and unemployment losses. Corruption further amplifies these losses by requiring larger hikes in taxes to reduce debt. We use the model to assess the recent fiscal consolidation plans in Greece, Italy, Portugal and Spain. Our results corroborate the evidence of increasing levels of tax evasion during these consolidations and point to significant output and welfare losses, which could be reduced substantially by combating tax evasion and corruption.

Internal Political and International Aspects of Regulation of the Shadow Sector as a Threat to Economic Security

The purpose of this research is to develop methodologies for the development of regulatory mechanisms of theshadow economy Russia from the viewpoint of the theory of economic interests. To implement the set goalshave been resolved following scientific problems:• Analysis of mechanisms of regulation of economic relations the Russian Federation.• To develop methodological basis of the theory of economic interests the informal sector of the RussianFederation and to formulate practical recommendations for their effective implementation.• To analyze the patterns of development of economic relations the informal sectors of the Russian Federation.• Identify actions the improvement of the tools of regulation of economic policy the informal sectors of theRussian Federation.• Develop a methodology to neutralize relations as the basis for the correction of imbalances economicinterests Russia.Theoretic-methodological basis of the study was the theory of economic interests, which is a research programfounded on the principles of relativism, scientific attractiveness as research methodology problems of influenceof economic relations at the national economic security is the ability of dialectical synthesis, which nomethodology of individualism, neither the methodology of holism.The study found that the potential of the Russian society because of its high social structure that hasallowed to define major directions of social-economic policy order to neutralize the effects of the shadoweconomic activity.Received confirmation of the fact that Russia there are two groups of subjects of the economy, guidedby their own interests: the first group is driven by the desire for personal enrichment, the second forced towithdraw in the shadow to survive the conditions of unreasoned economic (tax) policy and administrativearbitrariness.It is proved that the constructive component of the economy is concentrated mainly on the productionstage of the process of reproduction, and its destructive part - the sphere of exchange and distribution.Based on the theory of economic interests has developed instruments for the protection of national-stateeconomic interests Russia the context of combating dangerous manifestations of the economy.

Privatization Myths in russiaand the reality of local land Markets

The article analyzes the ratio of state and private forms of ownership of land and studies its local markets. The data collected as a result of field research of rural communities and also provided by real estate agencies allow to track the real growth of private property on land in municipalities. Studying the condition of local land markets at the level of rural communities one can make a number of unfavorable conclusions, such as growth of shadow sector and speculation in the prices of land plots within settlements. All these tendencies call into q uestion the existing scenario of carrying out privatization in Russia.