Effects of the Non-Observed Economy on Economic Security in the Republic of Moldova

Abstract

The non-observed economy refers to economic activity that escaped state control. Economic agents have learned to circumvent the laws governing economic activity. The elements of the non-observed economy are shadow production, smuggling, informal employment, income hiding, and other types of tax evasion. Economic crimes could be divided into two groups. The first group is illegal activities caused by high taxes or inefficient legislation, and the second is activities that harm not only the country's economy but on society. One of the objectives of the research is an analysis of the main shadow sectors, including informal employment, contraventions that affect entrepreneurial activity, taxation, customs activity, and securities. Thus, a quantitative and qualitative assessment of the non-observed economy was carried out (case: Republic of Moldova). The main methods used are theoretical and empirical. The authors identified the causes of the non-observed economy and their impact on economic security and described methods to combat the shadow economy. Among the main reasons are the lack of jobs, the relatively high unemployment among young people, and inefficient legislation. One of the reasons for the non-observed economy is a way to make more money because illegal goods are rare and have a high cost. Often, the existence of a shadow economy is caused by the high level of corruption in the country. All the described cases of the non-observed economy negatively affect economic security.