Category: Shadow Economy Dynamics

Armed conflict profoundly reshapes economic landscapes, particularly through the transformation of informal market structures. This study examines how armed conflict in Ukraine has altered informal market dynamics, focusing on the shadow economy's adaptation to wartime conditions. By synthesizing recent empirical evidence from diverse conflict-affected regions, we model the mechanisms through w...

Blockchain technology presents a transformative opportunity for tax administration, particularly in automating Value-Added Tax (VAT) collection through programmable smart contracts.[1] This article systematically investigates architectures for smart contract-enabled VAT compliance, addressing the critical need for reliable, transparent, and efficient tax reporting mechanisms in decentralized fi...

Detecting shadow economy activities through financial transaction monitoring is a critical challenge for regulators and financial institutions. This article investigates the application of machine learning algorithms to classify suspicious transaction patterns, using synthetic transaction data that mimics real‑world features such as amount, frequency, and entropy. We pose three research questio...

Monitoring shadow economy activity in near real-time remains a critical gap for policymakers, tax authorities, and international organizations. Traditional estimation methods—MIMIC models, household surveys, and currency demand approaches—produce estimates with lags of months to years, leaving decision-makers without timely signals. This article investigates whether open data sources can serve ...

The MIMIC (Multiple Indicator Multiple Cause) model has been the dominant framework for shadow economy estimation since the 1970s. However, its linear, latent-variable architecture imposes constraints that modern machine learning methods can overcome. This article evaluates neural network approaches to shadow economy estimation, comparing their predictive accuracy, non-linear pattern recognitio...

Tax compliance is a central determinant of shadow economy size, yet the behavioral mechanisms linking government enforcement to citizen reporting decisions remain poorly understood. Agent-based modeling (ABM) offers a bottom-up computational approach to simulating how individual taxpayers respond to audit probability, penalty severity, and peer behavior. This article applies ABM to tax complian...

This systematic review examines the relationship between EU accession conditionality and shadow economy reform in candidate and potential candidate countries. We address three research questions: (1) How does EU accession conditionality affect the size and dynamics of shadow economies? (2) Which policy instruments within the conditionality framework are most effective at reducing shadow economi...

This article examines how shadow economies evolve in post-conflict Balkan states, using econometric evidence from Bosnia and Herzegovina, Croatia, and Kosovo. Building on 25 years of MIMIC-methodology estimates, we analyze three research questions: the trajectory of informal economic activity following armed conflict, the relationship between economic development and shadow economy persistence,...

Poland has emerged as a European benchmark for combating tax evasion through comprehensive digital transformation of its tax administration. This article examines Poland's implementation of the Jednolity Plik Kontrolny (JPK, Standard Audit File) and the Split Payment Mechanism to quantify their effectiveness in reducing the VAT compliance gap and improving tax compliance. Drawing on European Co...

Georgia's radical tax reform of 2005—replacing a complex progressive tax system with a flat 12% rate—provides a unique natural experiment for studying the relationship between tax simplification and informal economic activity. This article examines two decades of data to quantify the reform's impact on Georgia's shadow economy, which fell from 68.8% of GDP (one of the world's highest) to 41.5% ...