Wage regulations and shadow economy in 28 European Countries

Abstract

Motivation: The regulations are seen as the push factor into shadow sphere. The identification of determinants of shadow economy is crucial element mainly due to policy reasons. However, the analysis of the shadow economy is challenging mainly because of the identification problems. Actors from the shadow sphere hide this activity intently. Additionally determinants, consequences and size of phenomena are changing all the time and vary from country to country. Aim: The main aim of the article is to analyse the relation of regulations on the labour market related to wages and shadow economy in 28 European countries in 2013 and 2016. Additionally, the author builds the ranking of countries to collate the selected regulations in European countries on the basis of created synthetic measure. Results: The relation between regulations concerning wages and shadow economy on the low level was identified. The built ranking of countries in 2013 and 2016 was opened by Denmark and Sweden as least regulated countries in the group of 28 European states. Additionally, in 2013 Germany was classified to the group of not regulated elements included in synthetic measure.