Abstract
This paper examines the relationship between the growth of Latvian firms and their involvement in the shadow economy in 2015. When up to 10% of the overall economic activity of firms is in the shadow economy, this had a growth-enhancing effect on firms that recorded non-positive growth during the last five years.
Using the perceptions of corruption and interview languages as instruments of measuring the shadow economy participation rate, the authors conclude that there is a positive relationship between perceptions of corruption and the shadow economy participation rate.