Evaluation of the shadow economy determinants in the Lithuanian labour market

• Leidėjo archyvas: knygos tekstas

ENThe shadow labour market is a significant part of the economy. The fact that the informal labour is primarily focused on value creation suggests that it is important not to fully eliminate informal activities, but to transform them from an informal to a formal mode. Literature analysis revealed that comprehensive research of the determinants of the shadow labour market must consider not only general, but also specific factors that most significantly affect a particular market because this approach allows to develop the relevant preventive measures. The major purpose of this research is to assess the impact of the relevant shadow economy determinants on Lithuanian shadow labour market and provide the recommendations concerning reduction of this market. The results of the respondent survey and expert evaluation confirmed that Lithuanian shadow labour market is most significantly affected by low tax morale and low wages. The other influential factors are excessive tax burden, income inequality, and distrust in the national government. The cases of informal work are most common in the construction, wholesale and retail, motor vehicle and motorcycle repair, and accommodation and catering service sectors. To diminish the size of Lithuanian shadow labour market, it is recommendable to ensure stability of the tax system, reduce wage-related taxes, and raise the population’s tax morale by educating the public about the consequences of the informal economy and arranging the appropriate tax administration. Keywords: shadow economy, labour market, Lithuania, tax morale, low wages, informal labour. [From the publication]