The underground economy in Romania

• Author: Litra A.V.
• Pages: 229-236

Bulletin of the Transilvania University of Braşov

Series V: Economic Sciences • Vol. 9 (58) No. 1 - 2016

The underground economy in Romania

Adriana Veronica LITRA1

Abstract: The paper aims at covering issues related to the underground economy, activities

that compound this phenomenon, its magnitude in Romania and reported to th e European

average. Underground economy in Romania consists of undeclared work (2/3 from the total)

and unreported income; it decreased from 33.6% of GDP in 2003 to 28% in 2014, but

remained over EU-28 average with about 10 p.p. Among EU-28 countries, only Bulgaria

exceeds the size of the underground economy of Romania. The underground economy is a

challenge for the leadership of the state which must act simultaneously to stop illegal

activities, and to discourage non-declaration of the legal activities. Corruption favours

maintaining the underground economy, delays economic development, obstructs democratic

processes and affects justice and the law state.

Key-words: underground economy, corruption, informal activities

1. Introduction

Underground economy, a phenomenon present in any economy, but in different

proportions, appears in the literature under various names: black market / shadow /

parallel / hidden / informal / gray / unofficial / cash / invisible economy. The

underground economy involves economic transactions not measured by government

statistics or ignoring government regulations and laws.

Underground economy can be seen as a complementary size of the formal

economy. The expansion of hidden economy has resulted in diminishing official

economic development, the negative effects being felt in terms of GDP size and tax

receipts.

One of the most comprehensive definitions was given by Pierre Pestieau,

according to which underground economy represents "all economic activities taking

place outside criminal, fiscal or social laws or escape national accounts inventory".

(Braşoveanu, 2010)

1 Transilvania University of Braşov, adriana.litra@unitbv.ro