Shadow Economies in the Baltic Sea Region 2015

Lithuanian Free Market Institute, November 2015

A new report by the Lithuanian Free Market Institute looks at perceptions and prevalence of the shadow economy in the Baltic Sea region. The shadow economy can be defined as the economic activity conducted outside of a country’s official economy, such as black market transactions and undeclared work. The study, conducted in six Baltic Sea region countries (Lithuania, Latvia, Estonia, Poland, Sweden, and Belarus), shows that the main drivers of shadow economies are economic restrictions, such as taxes and regulation. It investigates the public perception of shadow economies, engagement in illegal economic activities, and drivers of shadow economies, to draw policy recommendations. The study argues that the fight against the shadow economy will be most effective when the economic activity and value generated in the illegal sector is not eradicated, but rather transferred to the formal sector.

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