ECONOMETRIC ASSESSMENT OF THE RELATIONSHIP BETWEEN THE SHADOW ECONOMY AND HOUSEHOLD WELFARE IN UZBEKISTAN

Abstract

This article provides an econometric assessment of the relationship between the size of the shadow economy and household welfare in Uzbekistan. Using annual national time-series data for 2015–2025 and the Household Welfare Index (HWI) developed in a companion study, the article estimates a multiple regression model in which household welfare is explained by the shadow economy’s share of GDP, GDP per capita growth, digital payment penetration, and the inflation rate. The estimated model indicates a statistically significant negative relationship between the share of the shadow economy and household welfare, alongside significant positive effects of income growth and digital payment penetration. The bivariate relationship between the shadow economy share and the Household Welfare Index alone explains a substantial proportion of the variation observed over the period, while the sign and statistical significance of the shadow economy coefficient remain robust after the inclusion of the control variables. The article discusses the economic interpretation of these results, their policy implications, and the methodological limitations inherent in time-series estimation based on a relatively short annual sample.