Objective: Investigate the relationship between Romania’s informal and official economies from 2000–2010 using econometric models (ARDL and VECM).

Methodology: Applied Granger causality tests to analyse the impact of informality on official economic indicators, including real GDP and the employment rate for individuals over 50.

Key Findings: Estimated the informal economy’s size as a percentage of official GDP, identifying a long-term causal relationship where the official economy influences the informal economy.

Policy Implications: Provided insights into the impact of informality on tax revenue, labour market dynamics, and active ageing, supporting evidence-based policymaking in Romania.

Project manager: Davidescu Adriana Anamaria

Period: March-December 2010

Beneficiary: Ministry of Research, Innovation and Digitalization (Core Program)

Key Results:

• Informal Economy Size: Estimated the informal economy to range from 45% of official GDP in the early 2000s, decreasing to 37.4% by 2008, with a slight increase in recent quarters.
• Long-term Causal Relationship: A unidirectional long-term causality was found between the official and informal economies, showing the official economy’s influence on informal activity.
• Impact on Active Aging: Identified a positive long-term impact of the informal economy on active ageing, particularly for individuals over 50 in Romania.
• Economic Implications: Highlighted the informal economy’s effect on formal sector productivity, cash demand, and labour market participation, with notable implications for tax revenue and social policy.