"Estimating the size of the hidden economy in transitional countries in eastern Europe is a very important task. This paper reports the results of an independent study of the hidden economy in Bulgaria. The study was conducted in 2007-2008 and was based on a survey of 345 companies in Bulgaria. The main findings of the study are as follows: 1. The size of the hidden economy in Bulgaria was found to be considerably larger than the official estimates. It was estimated by business sector respondents as comprising 42 per cent of GDP in 2007. The size of the hidden economy decreased slightly between 2002 and 2007. 2. The economic sector with the largest hidden economy was construction, followed closely by the retail and wholesale trades. 3. The two most important indicators of the hidden economy were hidden labour and hidden economic activity by firms. 4. The most important reasons for the existence of a hidden economy were: corruption; the lack of penalties for unlawful economic activity; and the ineffective judicial system. "

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