Informal Economy in Post-Soviet Economies: Role of Financial Development and Quality of Governance Institution

Abstract

This study investigates the impact of financial development and quality of governance institutions on informality in 13 post-Soviet economies from 2000 to 2020. The estimated results reveal that the increase in information and communication technology, financial globalization, GDP per capita, and institutional quality has significant negative impact on prevalence of informal economy, while financial development increase informality. However, improvement in quality of governance institutions can alter the positive impact of financial development to negative. These findings urge sampled post-Soviet economies to improve institutional quality along with information and communication technology infrastructure to reduce informality.