Selected aspects of the social protection system’s financial security in the context of shadow economy

Economic Annals-ХХI: Volume 158, Issue 3-4(2), Pages: 88-91

Citation information:
Malyovanyi, M., Rolinskyi, O., & Lysa, N. (2016). Selected aspects of the social protection system’s financial security in the context of shadow economy. Economic Annals-XXI, 158(3-4(2)), 88-91. doi: https://doi.org/10.21003/ea.V158-20

Mykhaylo Malyovanyi
PhD (Economics),
Associate Professor,
Uman National University of Horticulture
1 Instytutska Str., Uman, 20305, Ukraine
malyovanyi1980@mail.ru

Olexander Rolinskyi
PhD (Economics),
Associate Professor,
Uman National University of Horticulture
1 Instytutska Str., Uman, 20305, Ukraine
eskanderol@bigmir.net

Nataliya Lysa
PhD (Economics),
Senior Lecturer,
Department of Finance and Credit,
Uman National University of Horticulture
1 Instytutska Str., Uman, 20305, Ukraine
lisa.nataliya@mail.ru

Selected aspects of the social protection system’s financial security in the context of shadow economy

Abstract. Introduction. The level of social protection in the country depends on a number of socio-economic factors that affect the formation of its financial sources positively as well as negatively. The shadow economy in the country is one of the key factors. The purpose of the article is to conduct an economic and statistical analysis of the impact of the shadow economy on the financial support of social safety. Results. The level of the shadow economy is one of the most important factors influencing the financial security of the social protection system. The economic and statistical analysis of the empirical data on the OECD countries for the period of 1980-2014 with the use of the correlation and regression analysis and analytical grouping shows a direct correlation between the level of the shadow economy and the level of social spending per capita.

The empirical regression equation y = 123777.7 – 331.625x shows that the growth in size of the shadow economy by 1% leads to a decrease in social spending per capita in PPP $ 331.62 (assuming constancy of other factors that influence the effective feature). The results confirm that countries with a higher level of shadow economy have lower social spending per capita. It is connected with the reduction of the sources of social safety funding. The situation of the shadow economy in Ukraine is extremely difficult, and it is such even if compared to not only developed countries. It has been revealed that shadow employment as a form of the shadow economy is one of the greatest reasons for the lack of financial resources in the system of social safety. It is calculated that annual financial losses of the social safety system are about 401.5-1147.2 million UAH. These losses are caused by the spread of informal employment in Ukraine. Conclusions. The analysis proves a need to combat the shadow economy and its manifestations today. However, existing methods of preventing this phenomenon are not effective, which is confirmed by the sustained performance of the shadow economy in Ukraine. From our perspective, it is explained by incomplete understanding of its main factors by the state. These factors influence the formation of the economy and the use of ineffective tools (increased administrative burden on taxpayers, increased fines, etc. The government initiative to reduce the amount of insurance premiums to the payroll has not reached its goal because of various conditions that constrain its positive side. It is advisable to concentrate further studies within the area of research on the ideas, methods and tools for reducing the shadow economy. It can be done with the help of an objective analysis of social and economic factors affecting the level of the shadow economy.

Keywords: Financial Security; Social Protection; Financial Resources; Shadow Economy; Informal Employment

JEL Classіfіcatіon: E24; G22; G23; H53

DOI: https://doi.org/10.21003/ea.V158-20

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Received 10.02.2016