Potential for increasing the efficiency of public administration in municipal institutions based on the relationship between the unemployment rate and the shadow economy

ABSTRACT

Effective regulation of the labour market depends to a large extent on the quality of public administration. The Covid-19 pandemic highlighted the problem of unemployment in regions, which led to the spread of the shadow economy. The article aims to research the relationship between the unemployment rate and the shadow economy in Lithuanian regions over the period 2000-2019, to reveal the regional disparities in terms of the above-mentioned economic variables and submit recommendations to municipal authorities on how to reduce the strength of the relationship under consideration. Pearson and MCD correlation coefficients revealed that the relationship between the unemployment rate and the shadow economy is negative in all Lithuanian regions. An increase/decrease in the unemployment rate leads to a decrease/increase in the size of the shadow economy. The hypothesis proposing that “the municipalities with a high unemployment rate tend to have a stronger relationship with the size of the shadow economy” was only partly confirmed. The strongest relationships between the unemployment rate and the size of the shadow economy were found in Visaginas and Marijampolė municipalities, meanwhile only the calculated median values indicated that the unemployment rate in Visaginas amounted to 11.8 percent, and in Marijampolė – to 11.2 percent over the period under consideration. The two above-mentioned municipalities are among the municipalities with the highest unemployment rate, but lag behind Lazdynai (15 percent), Ignalina (14.9 percent.), Kalvarija (14.6 percent), Akmenė (14.5 percent), Jurbarkas (14 percent), and Zarasai (14 percent) municipalities. Considering the results, cooperation between the Employment Service and Lithuanian municipalities should be improved with a view to identifying whether a person registered with the Employment Service has applied to a municipality for social support;the State Labour Inspectorate, the Employment Service and the State Tax Inspectorate should also improve their cooperation to establish the principles for exchange of the data on the activities of the labour force assigned to risk groups. © 2022, Bucharest University of Economic Studies Publishing House. All rights reserved.