Halyna Mishchuk

National University of Water and Environmental Engineering,

Rivne, Ukraine

E-mail: h.y.mischuk@nuwm.edu.ua

Impact of the shadow economy on social safety: The experience of Ukraine

Svitlana Bilan

Rzeszów University of Technology, Poland

E-mail: s.bilan@prz.edu.pl

ORCID 0000-0001-9814-5459

Halyna Yurchyk

National University of Water and Environmental Engineering,

Rivne, Ukraine

E-mail: g.m.urchik@nuwm.edu.ua

Liudmyla Akimova

National University of Water and Environmental Engineering,

Rivne, Ukraine

E-mail: l.m.akimova@nuwm.edu.ua

ORCID 0000-0002-2747-2775

Mykolas Navickas

Klaipeda University,

Lithuania

E-mail: mykolas.navickas@gmail.com

ORCID 0000-0002-4734-2804

Abstract. The links between lawful economy and the shadow economy with social safety are investigated. Based on the existing methods of estimating the shadow economy, it is determined that its official level in Ukraine exceeds the critical one (30% according to the Ministry of Economy) by most estimation methods and was ranging from 18 to 46% in 2018. This significant shadowing of the economy has a negative impact on GDP (correlation coefficient -0.729) and; is directly related to the low competitiveness of the economy as per the world rankings. Having impact on the generation of secondary income through fiscal redistribution mechanisms, the shadow economy has a negative impact on the main components of social safety, including the spread of poverty, maintaining an inefficient cost structure with a high share of food expenditures (which is also a sign of low living standards); and limited housing opportunities. The relationship between the shadow economy on the one hand and economic & social safety on the other (-0.865 and -0.560, respectively) has been determined using the correlation analysis. Economic losses from the reduction of tax revenues to the budget have been estimated to confirm the need to develop mechanisms to unshadow the economy as one of top priorities for public administration in the social sphere in Ukraine.

Received: October, 2019

1st Revision: April, 2020

Accepted: June, 2020

DOI: 10.14254/2071-789X.2020/13-2/19

JEL Classification: E26, I30, J18, P36

Keywords: shadow economy, social safety, social security, GDP, fiscal losses