Shadow Economy in the New Regions of Russia

The subject of this study is the shadow economy in the new constituent entities of the Russian Federation (DPR, LPR, Zaporozhye and Kherson regions) during their intensive socio-economic integration (20222025). The purpose of the work is to conduct a comprehensive analysis of the dual nature of the shadow sector, going beyond the traditional perception of it as an exclusively destructive phenomenon. The main research findings show that in the context of an institutional vacuum, the destruction of formal economic ties, and external sanctions pressure, the shadow economy in the new regions has become not just a deviation but an alternative life-support system. It performs critically important functions: it absorbs social shocks through informal employment, ensures economic connectivity by establishing shadow commodity flows, and acts as an incubator for grassroots entrepreneurial activity. The results can be applied in public administration and regional economic policy. The study concludes that a straightforward fight against the shadow sector is counterproductive. A strategy of “managed formalization” is needed, aimed at creating incentives for businesses to emerge from the “shadows” by simplifying regulations and increasing the attractiveness of the legal jurisdiction. The dynamics of the shadow sector are proposed as a key indicator of the integration processes. The research methodology is based on a systems approach, comparative analysis, and the principles of institutional economic theory. The study employs methods of structural-functional analysis to identify both the negative consequences of shadow activities and their positive adaptive-stabilizing functions. Scientific publications, analytical reports, and expert assessments concerning transitional and post-conflict economies were used as the empirical base.