Shadow Economy Index for Moldova and Romania 2015-2016

Abstract

This report presents estimates of the size of the shadow economy in Moldova and Romania during the years 2015-2016. The estimates are based on surveys of entrepreneurs in both countries, following the method of Putniņš and Sauka (2015). The components of the shadow economy captured by this approach include misreported business income, unregistered or hidden employees, and ‘envelope’ wages. Our estimates indicate that the size of the shadow economy in Moldova and Romania was approximately 29.7% and 33.3% of GDP in 2016, respectively. In both countries the estimated size of the shadow economy decreased in 2016 compared to 2015: in Moldova only slightly (0.1%) and in Romania by 2.3%. The contraction is mainly driven by a small decrease in underreporting of business income, which is the largest component of the shadow economy in both economies.