Abstract The shadow economy, encompassing unregulated, informal economic activities, remains a significant phenomenon across countries—both developing and developed. This journal article explores the multifaceted dimensions of the shadow economy, its determinants, and the implications for economic growth, tax policy, and social equity. A multidisciplinary literature review is presented, examining classical theories as well as contemporary empirical studies. The analysis identifies key determinants including regulatory burdens, tax rates, corruption, and labor market flexibility. Using examples from various national contexts, including the informal sectors in Eastern Europe, Latin America, and Southeast Asia, the study elucidates how socio-political and economic factors interact to foster extensive informal activities. The article concludes by proposing policy recommendations to integrate informal economic sectors into the formal economy, highlighting the importance of regulatory refor...