Influence of administrative barriers and institutional environment on the dynamics of shadow economy

In this work, the authors investigated the hypothesis about the dependence of the shadow economy on the value of administrative barriers and the quality of the institutional environment for doing business. Such parameters of institutional environment were considered as the level of corruption, the index of economic freedom, the protection of private property. To test the hypothesis, we made a comparative cross-country and cross-regional analysis of quantitative data with regard to the state of the shadow economy and business environment parameters mentioned above. The methodology of the research bases on econometric analysis used for modelling the influence of the institutional environment parameters and the level of administrative barriers on the level of shadow economy. An indicator of shadow economy elasticity to the scale of administrative barriers and the attractiveness of the institutional environment for doing business was introduced in the paper. The following results were obtained. The shadow economy in developing countries is a permanent phenomenon independent of the level of administrative barriers and quality of the institutional environment. This is due to the crisis state of the national economy of the countries mentioned above - because of the unfavorable economic situation shadow economy is the only competitive, and, therefore, dominant form of business activity, regardless of the risk and magnitude of the possible punishment. In addition, such a dependence on the level of economic development for the elasticity of the shadow economy remains for most countries: the elasticity is higher in the more developed countries, the countries with maximum values are classified as "free" according to the index of economic freedom classification. At the same time Russia is characterized by the low level of the elasticity (in the same group with African countries, developing countries of South-East Asia). This conclusion confirms the poor socio-economic development of the country. A similar study was conducted with reference to the subjects of the Urals Federal District. The results obtained were fully confirmed regarding the impact of the general level of socio-economic development on the elasticity of the shadow economy on administrative barriers and attractiveness of the institutional environment for doing business. The outcomes of the study were particular recommendations on priorities for administrative and economic measures to counteract the shadow economy, based on the current state of the territories discussed in the work (the subjects of the Urals Federal District).

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