Estimating Hidden Economy and Hidden Migration: The Case of Romania

Economists have already established a relationship between tax rates and size of the hidden economy. The higher the level of taxation is, the greater the incentive to participate in hidden activity and escape taxes is. On the one hand, coming from generally accepted findings of the theory, we concentrate on evaluating the reasons for agents’ involvement in hidden economy and estimating the size of this part of economy in the case of Romania. At the same time, there is evidence of an extended hidden migration together with an increase in the official migration data, usually from eastern EU members to western countries. In a sense, hidden migration could be in relation to proper hidden economy. On the other hand, using some indirect procedures, we try to estimate the size of hidden migration in Romania.