Tax wedge, labor market and the shadow economy - examples of Russia and Ukraine.
According to various authors, by the beginning of this century Ukraine’s shadow economy was estimated to be around 40‐50% of the official economy, one of the highest levels in Europe. The estimates for Russia show similar results (around 40% of GDP). These figures suggest that in both countries around 30‐40% of total employment is located outside the registered economy.
In order to curb this growing problem both governments introduced a series of tax and social security payment reforms between 1998 and 2004.