Naslov
The Correlation Between Formal and Informal Sector in Transition Economies

Autori
Botrić, Valerija ; Marić, Zdravko ; Mikulić, Davor

Vrsta, podvrsta i kategorija rada
Radovi u zbornicima skupova, cjeloviti rad (in extenso), znanstveni

Izvornik
An Enterprise Odyssey: Building Competitive Advantage / Galetić, Lovorka - Zagreb : Mikrorad, 2004, 15-16

Skup
2nd International Conference "An Enterprise Odyssey: Building Competitive Advantage"

Mjesto i datum
Zagreb, Hrvatska, 17.06.2004. - 19.06.2004

Vrsta sudjelovanja
Predavanje

Vrsta recenzije
Međunarodna recenzija

Ključne riječi
shadow economy; transition countries; panel data analysis

Sažetak
The main focus of our paper is the unofficial sector in the transition economies, and its impacts on the formal sector. Unofficial economy is not concentrated only in the transition economies. There is evidence on permanent existence of shadow economy in all of the developed, market economies. However, the magnitude of the informal sector in the transition economy on average exceeds by far the unofficial/official economy ratio of the developed country. Therefore, during the 1990-ies many researchers have recognized the shadow economy size as an issue that needs to be thoroughly investigated in the transition context. As a result, different methods of estimation of the shadow economy size have been proposed, and the share of the unofficial sector has been estimated by the large number of researchers, both for developed and transition economies. However, since the causes and consequences of the shadow economy might differ in the context of the transition process, so far the possible impacts of the large shadow economy on the formal sector have not been comprehensively studied. Our aim is to contribute to the empirical literature that investigates this issue, with specific goal to quantify the differences between the formal-informal sector relationship in the transition and developed economies. Since our key assumption is that the underlying forces of the economy differ in the case of transition countries in comparison with the developed economies, there are too many indicators which could by acting together encompass all these differences. Because the time span of the transition period is short, due to the degrees of freedom constraint in the econometric regression, it would not be possible to include many indicators in the regression equations. Therefore, our empirical method focuses on the informal sector and formal sector relationship. We conduct a panel data analysis which investigates the relationship, and the regressions are conducted separately for 10 transition countries and for 14 developed countries. Our results indicate that there are differences between the transition and developed economies, which confirms our initial assumption. The size of the shadow economy has negative impact on the rate of growth in the transition economies. In the developed economies, the link is vaguely positive, as indicated by previous studies.

Izvorni jezik
Engleski

Znanstvena područja
Ekonomija

POVEZANOST RADA