The shadow economy as a reflection of distorted free market laws

In recent years, the studies have been focused on reasons and motivational prerequisites for the shadow economy in different countries. At the same time, comparing and contrasting the formal economy with the shadow one, many researchers do not consider the impact of the laws of market relations on the scale of the shadow economy, the essence of the shadow economy reflecting the evidence and implications of the market economy laws. A retrospective analysis shows that the level of formal and shadow economy is determined by the level of market relations development, the compliance or incompliance with the free market laws, the market-oriented farming. Each level of commodity production corresponds to its level of market relations development, compliance or incompliance with the free market laws and, accordingly, the share of the formal or shadow economy. By comparing such indicators as Human Development Index (HDI), GDP per capita, GDP redistributed by the government, and unemployment rate, the author revealed correlation and dependence between these indicators and the level of shadow economy in different countries. He divided countries into four groups according to the level of shadow economy (minimum, high, very high, extra-high). The research demonstrates that the main reasons for the shadow economy are the distorted reflection of market laws, their different modifications caused by the actors of the market economy. In many cases, adherence to the free market laws and the different benefits gained from being a part of the shadow or formal economy are an indicator of the increasing number of entrepreneurs running an unregistered business.