INSTITUTIONAL DETERMINANTS OF THE SHADOW ECONOMY AND THEIR IMPACT ON HOUSEHOLD WELFARE
DOI:
https://doi.org/10.5281/zenodo.22879582Abstract
Differences in the size of the shadow economy across countries are determined largely by institutional quality rather than by economic factors alone. This study shows that stronger regulatory quality, effective control of corruption, and the rule of law are associated with lower levels of informality, whereas higher tax burdens and more complex business registration procedures contribute to its expansion. Since the shadow economy negatively affects household welfare, improving institutional quality represents a more effective long-term strategy for promoting economic formalization than relying solely on stricter enforcement.Keywords
shadow economy, institutional quality, regulatory burden, corruption, household welfareReferences
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