engleski

Estimating the size of Croatian shadow economy: a labour approach

The shadow economy, being present in every country in the world, is present in Croatia as well. It includes all unrecorded economic activities, employment and income. The activities in shadow economy are unregulated, untaxed, unregistered and unmeasured by official statistics. Shadow economy is a reflection of the imperfection of the economic system and inadequate economic policies of a certain state. Shadow economy in Croatia has influences on all kinds of economic activities with allocative, stabilizing, welfare and redistributive effects. The subject of this paper is to estimate the size of shadow economy in the period 2008-2014 using labour approach. Results shows that in period 2008-2014 the level of Croatian shadow economy was highest in 2010 (2.89%) and the lowest in 2012 (0.29%). The main reasons that have infected the raise of the shadow economy in the past decades in Croatia are: the tax policy with substantial increasing of the tax rates, the increasing burden of the labour costs, obtaining the different social supports, unsatisfactory with acting and goals of the government and changes in working ethics. The Croatian government has to lead such economic policy which will provide the economic growth and increase the living standard of citizens. Increasing real incomes of citizens and economic growth it can be expected that the size of shadow economy will decrease. In order to reduce the shadow economy, the Croatian government needs to implement serious sets of measures, especially structural reforms. It is also necessary to continue the development of the judiciary, take actions to improve the independence of the judiciary, review the principles of financial support for law enforcement and provide measures to improve their wages.

labour approach ; fiscal policy ; Croatia ; shadow economy

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