Shadow economy as a self-adjustment of poverty and a signal from invisible hand

Abstract

The article determines the necessity to consider shadow economy as an indicator of required essential changes. Shadow economy serves as a methodological tool for evaluation of consumer needs and real potential of a national economy and business, as well as a tool that exposes underdeveloped national laws regulating economic activities. The latter is possible because built up layers of unnecessary laws that prevent business freedom, excessive interfering of government regulation with a national economy, and contradictory bureaucratic procedures impact developing of shadow economy. It was proved that one of the tools for overcoming shadow economy is the development of small business. As a rule, the reasoning behind operating business in the shadow sector involves inadequate obstacles on the way of entering legal and registered market, high taxes, and corruption. However, people have no protection, and their risks are too high in the shadow sector.