This study examines the interrelationship between the shadow economy and household income in the Republic of Karakalpakstan, one of the most economically vulnerable regions of Uzbekistan, through the application of rigorous statistical methodologies. Drawing on data from the Statistics Agency of Uzbekistan, the International Labour Organization (ILO), and regional budget surveys spanning 2019–2023, the research quantifies informal employment rates, estimates the shadow economy’s share of gross regional product, and evaluates its implications for household income distribution. The findings indicate that the shadow economy constituted approximately 37.9% of gross regional product in 2023, accompanied by an informal employment rate of 44.8%. A statistically significant positive correlation (r = 0.97) between shadow economy intensity and income inequality — measured by the Gini coefficient — was identified. The article further proposes a multi-dimensional policy framework grounded in tax digitisation, formalisation incentives, and enhanced statistical infrastructure. The results contribute to the growing body of literature on informal economies in transition states and offer actionable policy implications for regional development planning.
Kadambay Sapayevich Atajanov (Fri,) studied this question.