Kundytskyj O., Doctor of Economics, Professor, Head of the Department of Management, Ivan Franko National University of Lviv, Lviv, Ukraine

e-mail: skund@ukr.net

Senyshyn O.,Doctor of Economics, Associate Professor, Professor of the Department of Management, Ivan Franko National University of Lviv, Lviv, Ukraine

e-mail: okssenyshyn@gmail.com

The shadow economy: essence, reasons of arising and consequences of existence

Abstract. Introduction. It is investigated in a scientific article the essence, reasons of arising and consequences of the shadow economy existence in Ukraine. A comparative analysis of different approaches to understanding the concept of the shadow economy is carried out, its essence and main purpose of existence are determined. It is clearly mentioned by the author the various argumentation of the interpretation of the shadow economy in the system of sociological, jurisprudence and economic sciences. Much attention is paid to the interpretation of the term «shadow economy» through the prism of economic science. It is presented by the author a number of opinions, which are largely reduced to understanding the shadow economy as an economic activity, which, for some reason, is not taken into account in the gross state product of the country.

Purpose. The purpose of scientific work is to determine the nature and reasons of the shadow economy arising and characteristics of main consequences of its manifestation.

Results. The expediency of application and using the combined economic-statistical and legal criteria for a more comprehensive understanding of the «shadow economy» category is argued. That is, such a concept is considered by the author of a scientific article as a system of business relations between business subjects that are illegal and not controlled by the state. It is proved that the use of any paradigm implies the definition of the causes that give rise to the shadow economy. Among them fundamental and specific causes of arising and development of the shadow economy are distinguished. A great deal of attention is focused on a number of peculiarities of the emergence and growth of the shadow economy in Ukraine, in particular, the following: the imperfect process of denationalization and the chaotic transfer of the public sector to private ownership; general economic decline of production in most industries; growing shortage of raw materials and energy resources; reduction of investment volumes and the beginning of large-scale export of capital abroad; the decline of high-tech industries and the decline of scientific activity in general and others like that. The reasons and consequences of shadowing of the economic system of the country are found out and the arguments concerning the dualistic influence of the shadow economy are presented.

Conclusions. It is argued that the main objective of the shadow economy is to minimize the costs of economic activity and maximize incomes not accounted by the state and civil society. In other words, such an economy functions in the shadow of formal institutions.

Keywords: the shadow economy; the level of the shadow economy; causes (reasons) of the shadow economy; consequences of the shadow economy; unshadowing.

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