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The Impact of Fiscal Policy and Deregulation on Shadow Economies in Transition Countries: The Case of Ukraine

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Abstract

A model of Ukrainian shadow economy moneydemand is estimated that includes newregulatory burden, tax complexity, andsoft-budget constraint variables. Thismodel is analyzed to determine the causesand dynamics of the Ukrainian shadoweconomy and to assess the effectiveness ofstate measures undertaken to reduce itssize. The direct tax burden, thebroadly defined regulatory burden, thecomplexity of the tax system, andsoft-budget constraints for enterprises are found tobe important causes of unofficial activity.The main explanatory factors forthe estimated decline of the shadow economyin recent years are explained and it is argued that theevidence has implications beyond the caseof Ukraine.

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  1. Ulrich Thießen
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Thießen, U. The Impact of Fiscal Policy and Deregulation on Shadow Economies in Transition Countries: The Case of Ukraine. Public Choice 114, 295–318 (2003). https://doi.org/10.1023/A:1022624619203

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