Atlas Network: New ‘Shadow Economy’ study examines black markets in Baltic states, Poland, Czechia, and Sweden

Lithuanian Free Market Institute’s study examines the number of goods bought and sold outside of government-sanctioned systems in Lithuania, Latvia, Estonia, Poland, the Czech Republic, and Sweden. Common terms for these outside operations are “the black market” or, as LFMI refers to them,  “the shadow economy” The results of the study reveal that a large number of Lithuanians purchase and sell goods or services illegally.

“Our data confirm that the most common unofficial goods and services have two fundamental features: those are either goods or services that comprise a large share of people’s total consumption, e.g. food or clothing, or highly taxed goods, such as tobacco, alcohol, or fuel,”  project research leader Vytautas Žukauskas explained in LFMI’s press release. “A total of 31% of the surveyed population admitted to having unofficially purchased foodstuffs, 28% – clothes, 25% – beauty services, 23%– auto repair services, 17% – cigarettes, 18% – construction and renovation services, and 17% – medicines and food supplements from unofficial sources in the past 12 months.”

Perhaps the most insightful portion of the study comes from the revelation that the majority of the goods bought and sold can be purchased under legal means in the six countries surveyed. The reason they have such a presence in the shadow economy is that the goods are available there without the substantial extra costs imposed by taxes.

“The most important factors of the shadow economy are related to taxation” the press release concluded. “Public perceptions of the reasons behind illicit purchases are similar in all surveyed countries. The high cost of legitimate goods and the price difference between legitimate and illegitimate goods is seen as the main reason for illicit purchases. This was indicated by 89% of respondents in Lithuania, 83% in Estonia, 75% in Latvia, 71% in the Czech Republic, 70% in Poland, and 66% in Sweden. High labor taxation is also considered to the main driver of undeclared work. It was reported by 64% of respondents in the Baltic States, Poland, and the Czech Republic, and 42% of the surveyed in Sweden. These findings are also in line with those of other international studies.”

This demonstrates that people will always be drawn to the cheapest methods of purchasing and selling goods, even when that means doing so illegally.

This article was originally published by the Atlas Network.