21 While a comparison of the _current share_ of the unofficial economy suggests a similarity between Uzbekistan and some CEE countries, this convergence is not present when reviewing over-time _trends_ in the unofficial economy throughout the transition. One characteristic of the evolution of the unofficial economies in the CEE countries is that the share of the unofficial economy increased initially and then underwent a reversal. The year of the turnaround varies among countries (e.g., after 1991 in Poland versus after 1993 in Romania). Overall there seems to be an association between economic liberalization in CEE countries and a tapering off in the growth, and subsequent decline, of the unofficial economy share.

# **Implications**

# _Summary of Main Findings_

This paper is a first attempt at providing a comparative perspective on the unofficial economy in the FSU and CEE region. Yet by assessing its evolution and size we also go further: we challenge the conventional view of what is important in these economies and what are their dynamics. A simple analytical framework is presented in which we emphasize the main characteristics of unofficial activities in the region to be the following (in contrast with conventional notions of informal sector studies in other parts of the world): (1) coexistence of state and nonstate activities and enterprises, where public institutions and state enterprises play an integral role; (2) relative scale and visibility (often similar to official activities); (3) the importance of the economic-regulatory nexus in motivating unofficial activities; (4) a continuum in the official-unofficial activity spectrum (often within the same enterprise); (5) access to state subsidies and social security; and (6) shallowness.

The main methodology used for comparing empirically the evolution of the unofficial economy in the countries in the region is based on the measurement of the difference between electricity consumption growth (as a proxy for overall GDP growth), on the one hand, and official GDP growth, on the other. Taking the empirical case of Ukraine first, we reviewed the available microevidence and surveys on the unofficial economy and then independently applied the macroelectric methodology to the country. The results suggested broad consistency between the micro- and macroelectrical approaches. We then applied the macroelectric methodology to other countries in the region in order to establish a comparative perspective. The main empirical results from this comparative methodology were: (1) significant size and growth in the unofficial economy, whose average share in overall GDP more than doubled from 15 percent to over 30 percent for the sixteen countries in the region during 1989-94, and whose absolute growth exceeded 50 percent; (2) large variance in the evolution and size of the unofficial economy within the region; (3) unofficial economy partial mitigation of the large drop in official GDP; and (4) broad cross-country empirical consistency with the hypothesized determinants for a rapidly growing unofficial economy (that is, low initial share; high degree of bureaucratic discretion; civil war; undeveloped market institutions and enforcement mechanisms; low degree of