Assessing the Scale of the Shadow Economy in the Republic of Karakalpakstan and Improving Mechanisms for Its Reduction

This article assesses the scale of the shadow economy in the Republic of Karakalpakstan and proposes directions for further improving the mechanisms aimed at its reduction. Using a labour-resourcebased proxy indicator, the study derives estimates ranging from 11.2% to 11.7% for 2000–2022. These estimates should be interpreted with caution because the indicator does not directly measure unreported economic output. These estimates are compared with the results of a survey of enterprise managers and updated using official data for 2023–the first half of 2026. A log-linear regression model indicates that a 1% increase in electronic money turnover is associated with a 0.20% reduction in the estimated scale of the shadow economy, whereas increases in personal income tax revenue and the number of unemployed persons are positively associated with the model-estimated shadow economy. The study proposes criteria for classifying the regional shadow economy into natural, moderate, and elevated levels and compares inertial and target scenarios through 2030.