This paper studies the impact of remittance flows on the size of informal economies in post-Soviet countries. We compile a unique data set from a cluster of transition economies and use panel data econometric models to estimate effect sizes. Identification comes from varying macroeconomic conditions in Russia, which are plausibly exogenous to currency demand in remittance–recipient countries. Our estimates indicate that, across our models, it seems plausible that around 25% of all remittances flow into the informal economies of the region. Since shadow economies facilitate numerous illegal activities (such as organised crime, informal money lenders and money laundering), stronger regulatory and institutional frameworks accompanied with provision of incentives for informal firms to be integrated in the formal economy are likely to curb undesirable economic behaviour.
|Number of pages||24|
|Early online date||21 Dec 2022|
|Publication status||E-pub ahead of print - 21 Dec 2022|
- informal economy
- post-Soviet economies