Grey Market and the Income Inequalities in the Post-Socialist Economies
Posted: 6 Dec 2010
Date Written: April 5, 2009
This paper analyzes the relation between the shadow economy and income inequalities. For transition economies, the share of output produced in the informal economy is positively correlated with income inequalities. This hypothesis is strongly supported by empirical data for 17 transition economies in 2005. Unofficially gained incomes contribute significantly to the increasing income inequalities in post-socialist countries. Additional incomes from unregistered activities are the domain of the richest and the progressive tax system is not strong enough to counteract this phenomenon.
Keywords: income inequalities, transition economies, informal economy
JEL Classification: A10, D63, O17
Suggested Citation: Suggested Citation