Shadow economy in Russian Federation

Despite the fact that shadow economy has been discussed in every period of time, the discussions about it became more widespread in the 1 970s, when the subject of social welfare state was began to question. To finance the required policy measures put forward by the concept of social welfare state, consequently, increasing taxes and similar cuts have been encouraging people to hide their revenues or to declare less than its real level. Whilst the world was the scene of this tendency, after the collapse of Soviet Union at the beginning of 1990's many planned economy, in this context Russia took the path to the market economy. In the first years of transition period, as a result of privatization policies most of the public enterprises of Russian Federation were handed over to private sector. However, the absence of economic and legal regulations, non-existence of institutional formations which coordinate the activities of private sector, has been facilitating the possibilities of business operations to be left away from inspection and to realize them in shadow economy. In the result of implementation of non-optimal privatization policies and transfer of public property to some groups created a ground for organized crime groups which has been destroying the economy of the country and hindering the development of market economy. The shutting down of former public enterprises, the transfer of these enterprises to private sector in the short time caused to loss of work opportunuties and forced people to look for a job under non - formal relations. In this study taking into consideration the above mentioned cases, we have analysed the shadow economy in Russia between 1990s and 2000s years. The shapes of shadow economy activities that differ from the other countries and are peculiar only to Russia has been discussed and the influences of some social and economic transformation movements over shadow economy has been evaluated in the context of transition process. By this analysis we have tried to explain that the fast rise of shadow economy in Russia has been caused by transitional shocks.Beside this, we have come into conclusion that accompanied by the general recovery tendency after 1998 year Russia's shadow economy has began to slow down, in other words began to return towards 'normal' levels. Vlll