Robust determinants of the shadow economy

This study examines the determinants of shadow economy by employing Bayesian Model Averaging technique, which allows taking into account model uncertainty. Having estimated millions combinations models, revealed that while higher GDP growth rate, trade openness, and better institutional quality lead to reduction informal sector, rate unemployment, complicated regulations, large size government are associated with a greater economy. Lessening bureaucratic complexity eliminating burdensome regulations could help reduce both wasteful spending on operating these underground