Causes of the Unofficial Economy in New Eu Member States

Abstract

The aim of the paper is to test the impact of various potential causes of unofficial economy in new member states (NMS). The hypothesis of the paper is that the most significant factors in NMS are the tax burden and the overall institutional environment. Paper uses unofficial economy estimates based on MIMIC and exhaustiveness of national account approaches over a longer period. A panel data method is used in econometric models in which various indicators of the intensity of regulations, tax burden, institutional framework and labour market conditions are used as potential factors able to explain cross-country differences in the sizes and trends in the unofficial economies.

Key words:

• Nofficial economy
• Tax evasion
• Institutional framework
• New member states
• Croatia