The shadow economy in the agricultural sector: specific manifestations and strategies for countering it

Nabi Avarsky; Sergey Kleschev

VAK Russia 5.2.3 UDC 338

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THE SHADOW ECONOMY IN THE AGRICULTURAL SECTOR: SPECIFIC MANIFESTATIONS AND STRATEGIES FOR COUNTERING IT The shadow economy in the agricultural sector: specific manifestations and strategies for countering it

АА Аа

Published in Economic policy and national security · Issue 2 · Pages 6–18 · Rubric: Countering money laundering, corruption, and the Shadow Economy

Received: 09.03.2026 Accepted: 20.04.2026 Published: 30.04.2026

Authors

Nabi Avarsky

ORCID

Sergey Kleschev

ORCID

Nabi Avarsky

Academic degree: doctor of economic sciences

Science rang: corresponding member author.academy_titles.32

Federal Research Center of Agrarian Economy and Social Development of Rural Areas – All-Russian Research Institute of Agricultural Economics Scientific Secretary, Head of the Department · Department of Marketing and Development of Food Markets · Russian Federation · Moscow

ORCID

Sergey Kleschev

Academic degree: candidate of economic sciences

Ministry of Science and Higher Education of the Russian Federation Assistant Minister · Russian Federation

ORCID

ABSTRACT

Introduction. In the agricultural sector, the distinction between legal household activities, informal employment, and activities in the shadow economy is less clear than in other sectors of the economy. This results in intermediate, semi-legal and socially acceptable forms of informal activity characterised by low wages, seasonal employment and geographical dispersion. The purpose of the article is to provide empirical evaluation of the impact of shadow economy activity in the agro-industrial complex on the sectoral structure of gross regional product. In addition, the article also aims to identify key priorities for formalising economic relations, taking into account the level of digitalisation in interactions between government authorities and agricultural producers. Methods. The empirical basis of the study is drawn from official regional statistical data from the Federal State Statistics Service and the Federal Tax Service for the constituent entities of the Russian Federation, based on figures from 2024. Two complementary specifications of regression models were used in the study. In the initial analysis, it is used linear paired regression equations to assess the impact of the share of the agro-industrial complex in gross regional product (GRP) as the primary explanatory factor. The second analysis examines the impact of the composition of the sectoral structure of GRP, incorporating the shares of all sectoral complexes in the regression equation simultaneously. Results. Informal economic activities driven by compensatory effects should be formalised through minimal entry costs and other incentive mechanisms. Countering the growth of the shadow economy caused by tax evasion is best achieved through control procedures and increased transaction costs for those who break the law. In the short term, the priority should be to segment agricultural producers and launch formalisation programmes for them, using risk-based control tools, and impose strict sanctions on repeat offenders. It is imperative that, in the long term, measures be taken to reduce the costs of formalisation for micro-businesses. Moreover, there is a need to integrate digital traceability systems with tax and labour administration, and to expand cooperation and real-time advisory support.

KEYWORDS

shadow economy, informal employment, risk-based supervision, digital interaction

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