SIZE OF THE SHADOW ECONOMIES OF 28 EUROPEAN UNION …
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decrease are Austria, Belgium, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Slovenia, South-Cyprus, Spain, Slovakia, and Sweden, whereas the shadow economy will increase in Croatia, Bulgaria, Hungary, Romania and UK. The strongest increase will take place in Croatia from 26.5% of official GDP (2017) to 27.4% in 2018 and in the UK from 9.4% of GDP in 2017 to 9.8% in 2018; the strongest decrease will be in Estonia from 24.6% (2017) to 23.1% in 2018. To sum up: In the vast majority of the 28 EU-countries, the shadow economy will further decrease, averaging to 16.8% of official GDP in 2018. If one considers the size of the shadow economies over the last 2 years (2017 and 2018) and compare them with the years 2008/2009, one realizes that, in most countries, one will again have a decrease in the size and development of the shadow economy, which is due to the recovery from the worldwide economic and financial crises. Hence, the most important reason for this decrease is that, if the official economy is recovering or booming, people have fewer incentives to undertake additional activities in the shadow economy and to earn extra “black” money.
Summary and Conclusions To summarize: There are three different developments with respect to the size of the shadow economy of these 28 countries: 1. In general, one has a further decline of the shadow economy in 30 out of the 36 OECD countries. The main reason is a further recovery of the official economy. In 6 countries, one observes an increase due to a sluggish official economy or due to policy decisions which increased the shadow economy. 2. The eastern or central European countries and/or the “new” European Union members, such as Bulgaria, Cyprus, the Czech Republic, Latvia, Lithuania, and Poland have higher shadow economies than the “old” European Union countries, like Austria, Belgium, Germany, and Italy. Hence, one has an increase of the size of the shadow economy from west to east. 3. Also, one observes an increase in the size and development of the shadow economy from north to south. On average, the southern
