Shadow economy and its impact on the public administration: Aspects of financial and economic security of the country's industry

Abstract

Many countries face with a shadow economy today. This phenomenon is a real problem for the governments, especially in the context of significant upheavals, reducing fiscal potential, distorting the development indicators and complicating any analytical conclusions about the state of the economic system. Given these facts the study analyses the problem of shadow industry in the Ukraine’s regions, in particular by evaluating the integral index of financial and economic security of the industry. Its goals are: 1) development of the theoretical and applied approaches to the impact of the shadow economy on the public administration in relation to financial and economic security of industry in the regions of the country; 2) improvement of the methodology for governmental policy analysis of the level of the shadow economy in the said industry. Recommendation of the public policy measures to reduce the level of shadow industry in the regions were also presented. The method of analytic hierarchy process, the expert methods and the method of calculating the integral index as research methods were used in the study. Based on the analysis conducted, the matrix of strategic zones “Level of the shadow economy-level of the financial and economic security” was constructed. The proposed matrix should be useful in taking public management decisions, depending on the strategic area in which the region is located.