Vinnychuk I. Modelling of functioning of legal and shadow sectors of the economy

The thesis is devoted to the further development of theoretical and methodical approaches in modeling of functioning of legal and shadow components of the economy. On the current stage of development of Ukrainian economy we can observe the extensive development of economic relations, covering unlicensed, unregulated and illegal business activities. These relationships are called shadow economy and make a significant impact on all socio-economic processes taking place in society. The shadow sector significantly influences all aspects of economic activity, political and social life of each country. In such circumstances, the studies of the interaction between legal and informal sector are actual. Without considering this interaction, economists cannot provide scientific economic analysis at the macro and micro levels and effective decisions making. During recent years, the number of publications dedicated the shadow economy research has increased, in which different approaches and instruments are used. But these publications are aimed or at assessing the impact of the shadow economy to economic development, or estimating quantities or determining how influence different social and economic changes to the shadow economy. Consequently, it is necessary to analyze the direct interaction processes between legal and shadow economies. This drove the thesis topic selection and defined the aim and objectives of the research. The aim of the thesis is to develop the legal and shadow economies functioning models and appropriate computer and information support for their practical use in decision support system during the implementation of regulatory measures of shadow economy reducing. To achieve the aim the following objectives were studied: - analysis of the phenomenon of the shadow economy, its features and characteristics; - studying of the theoretical aspects of the shadow economy reducing; - analysis of the methods and models of the identification and evaluation of the shadow economy activity; - construction of the basic model in the case of the shadow economy sector functioning and their modifications; - design the models of legal and shadow economies functioning taking into account extended structure of society; - construction of the legal and shadow economies functioning models taking into account risk of shadow economic activity, which is a decisive factor in the implementation of regulatory measures of reducing the shadow economic activity; - analysis of the impact of shadow economy on information and tools development, that are the technological basis of simulation system and the application of the models in economic decision-making; - analysis of the main tendencies and trends of economic dynamics based on experimental results of the developed models; - studying the dependence of the model solutions on its parameters. The simplest basic model of economic dynamics and its modifications in case of shadow sector functioning and structuration of economic agents on the employees, who provide producing of aggregate social product, and the proprietors of the facilities for producing goods were designed. The model of legal and shadow sectors functioning in the area of economic variables reflecting the extended economic structure of society and the price of aggregate social product is constructed. The generalized model of legal and shadow sectors functioning of the economy taking into account extended economic structure of society (including non-working pensioners; real sector workers; business owners or entrepreneurs; workers of budget organizations (employees); pensioners working in the real sector; pensioners working in budget organizations; elite (high-ranking officials and executives)) and the risk of shadow economic activity is constructed. Appropriate information support and software are designed for experimental studies (simulation) with this model to identify major trends of socio-economic processes under conditions of the shadow economy and its impact on overall economic dynamics. Based on computational experiments with models of legal and shadow sectors functioning the dependence of model solutions from its parameters is revealed and patterns of influence of several factors on the dynamics of the processes occurring in the studied economics is established. Reducing the size of the shadow economy is possible due to making arrangements that take into account the general macroeconomic trends of shadow and legal sectors functioning, to effectively use risk leverage for stopping shadow effects and favorable legalization of illegal production. This allows us to offer appropriate recommendations to improve governance and government regulation of the economy.