Shadow economy has many repercussions affecting most sectors of the economy. Our research question is how shadow economy affects income distribution. The contribution of the present paper is that if is found that shadow economy worsens income distribution.
Our sample includes the following countries Austria, Belgium, Cyprus, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Portugal, Spain, Sweden and UK. It becomes evident that, international accounting standards and international standards of auditing should be adopted by EU members to eliminate shadow economy, and thus promote not only economic growth but also political stability.
The structure of this paper has as follows. Literature review will be presented in sector 1. In sector 2 the econometric model will be analyzed and finally conclusions will be discussed in sector 3.peer-reviewe
