Evaluating the relationship between sustainable development, localisation and the informal economy: evidence from Romania

The aim of this paper is to deepen understanding of the relationship between sustainable development, localisation and the purchase of goods and services from the informal economy. This has not before been investigated. To do so, it reports a survey of 1,209 respondents conducted during October-December 2021 in Romania, a country with one of the largest informal economies in the European Union. The findings reveal a link between consumers’ motives to purchase informal goods and services and the pursuit of sustainable development through localisation. The analysis shows that there is no purely sustainability-driven consumer in the informal economy, but this rationale is prevalent as one of several motives for a large proportion of consumers purchasing goods and services from the informal economy, who do so explicitly for the purposes of environmental protection and localisation. The implications for theorising and tackling the informal economy are then discussed

Evaluating policy approaches for tackling informal entrepreneurship

When tackling the informal economy, an emergent literature has called for the conventional rational economic actor approach (which uses deterrents to ensure that the costs of undeclared work outweigh the benefits) to be replaced or complemented by a social actor approach which focuses upon improving tax morale. The purpose of this paper is to explore the effectiveness of these two policy approaches in reducing informal sector entrepreneurship. To evaluate this, data are reported from a 2015 representative survey involving 1,384 face-to-face interviews with owners or managers of small businesses in three South-Eastern European countries namely, Croatia, Bulgaria and FYR Macedonia. The findings provide support for the ‘social actor’ approach and display that small businesses have a greater propensity to perceive competitors as operating informally when the level of tax morale is lower. Meanwhile, no support for the deterrence measures of the ‘rational economic actor’ model is reported. The major limitation of the study is that the paper is not able to display the reasons for the low level of tax morale and horizontal trust. Therefore, further in-depth qualitative research is necessary to explain whether and how the low levels of trust are determined by the failures of various formal institutions. This is the first known study on small businesses which analyses simultaneously two distinct policy approaches that aim to reduce participation in informal entrepreneurship

Explaining participation in undeclared work in France: lessons for policy evaluation

Purpose - France is as a model of best-practice in the European Union as regards policy to combat undeclared work. This paper takes the country as a case study with which to evaluate the competing explanations of why people engage in undeclared work which underpin such policy: namely, the dominant rational-economic actor approach and the more recent socialactor approach. Methodology - To evaluate these approaches, the results of 1,027 interviews undertaken in 2013 with a representative sample of the French population are analysed. Findings - The finding is that higher perceived penalties and risks of detection have no significant impact on the likelihood of conducting undeclared work in France. In contrast, the level of tax morale has a significant impact on engagement in the activity: the higher the tax morale, the lower is the likelihood of participation in the undeclared economy. Higher penalties and risks of detection only decrease the likelihood of participation in undeclared work amongst the small minority of the French population with very low tax morale. Practical Implications - Current policy in France to counter undeclared work is informed principally by the rational economic actor approach based on a highly-developed infrastructure for detection and significant penalties alongside incentives to declare small-scale own-account work. The present analysis suggests that this approach needs to be supplemented with measures to improve citizens’ commitment to compliance by enhancing tax morale. Originality/value - This case study of a country with a well-developed policy framework to combat undeclared work provides evidence to support the social-actor approach to informing policy change

Evaluating the internal dualism of the informal sector: evidence from the European Union

Purpose To transcend the current debates about whether participation in the informal sector is a result of informal workers “exclusion” or their voluntary “exit” from the formal sector, the aim of this paper is to propose and evaluate the existence of a dual informal labour market composed of an exit-driven “upper tier” and exclusion-driven “lower-tier” of informal workers. Methodology To do this, data from a 2013 Eurobarometer survey involving 27,563 face-to-face interviews across the European Union is reported. Findings The finding is that in the European Union, there is a dual informal labour market with those participating in the informal sector due to their exclusion from the formal sector being half the number of those doing so to voluntarily exit the formal sector. Using a logistic regression analysis, the exclusion-driven “lower tier” is identified as significantly more likely to be populated by the unemployed and those living in East-Central Europe and the exit-driven “upper tier” by those with few financial difficulties and living in Nordic nations. Research implications The results reveal the need not only to transcend either/or debates about whether participants in the informal sector are universally exclusion- or exit-driven, and to adopt a both/and approach that recognises a dual informal labour market composed of an exit-driven upper tier and exclusion-driven lower tier, but also for wider research on the relative sizes of these two tiers in individual countries and other global regions, along with which groups populate these tiers. Originality/value This is the first evaluation of the internal dualism of the informal sector in the European Union

Stereotyping Effects on Cities: Measurement Scales for City's Warmth and Competence

In the endeavor of analyzing urban development perspectives, the current paper aims to find out how warmth and competence stereotypes would operate in the case of a city, predicting its future, as a direct consequence of people's positive or negative feelings and actions. Results of such analyses would be of strategic importance, knowing that various aspects of urban development (from tourism to business, well-being, active population growth and talents retention) depend on people’s decisions to visit that city, to invest, to work, to study, to settle down there, or to simply spread positive opinions about it. Therefore, relying on the well-known SCM -stereotype content model, the paper adapts previous warmth and competence scales, and develops a customized research instrument for analyzing connections between people's perceptions and the mental labels attached to a specific city. Considering warmth and competence dimensions, as well as the other variables of interest such as status, cooperation and competition, we use an exploratory procedure for item selection followed by a Q-sorting analysis for scale content validation. The paper adds to the literature in two main ways. It firstly advances an integrative view that connects the theories from social psychology, communication and branding with those from urban development. Secondly, it offers a content validated measurement instrument, as a necessary departure point for future analyses meant to identify challenges and to predict the potential for development of smart and sustainable cities

Explaining participation in the informal economy a purchaser perspective

Purpose Participation in the informal economy has been predominantly explained from a supply-side perspective by evaluating the rationales for people working in this sphere. Recognising that many transactions in the informal economy are often instigated by customers, exemplified by purchasers asking “how much for cash?”, the aim of this paper is to explain the informal economy from a demand-side perspective by evaluating citizens‟ rationales for making purchases in the informal economy. Here, we test three potential explanations for acquiring goods and services in the informal economy, grounded in rational economic actor, social actor and formal economy imperfections theoretical perspectives. Methodology To do this, a 2013 Eurobarometer survey, involving 27,563 face-to-face interviews conducted in 28 European Union member states is reported. Findings The finding is that all three rationales apply but the weight given to each varies across populations. A multinomial logit regression analysis then pinpoints the specific groups variously using the informal economy to obtain a lower price, for social or redistributive rationales, or due to the failures of the formal economy in terms of the availability, speed and quality of provision. Practical Implications The outcome is to reveal that the policy approach of changing the cost/benefit ratios confronting purchasers will only be effective for those purchasers citing a lower price as their prime rationale. Different policy measures will be required for those making informal economy purchases due to the shortcomings of the formal economy, and for social ends. These policy measures are then discussed. Originality/value The value and originality of this paper is that it explains participation in the informal economy from a purchaser, rather than the predominant supplier, perspective

Tackling bogus self-employment: some lessons from Romania

In recent years, recognition that bogus self-employment is rapidly growing, not least because of the advent of what has been called the ‘gig,’ ‘sharing’ or ‘collaborative’ economy, has led governments to search for ways to tackle this form of dependent self-employment that is widely viewed as diminishing the quality of working conditions. Until now, however, there have been few ex-post evaluations of policy initiatives that seek to tackle this phenomenon. Therefore, the aim of this paper is to provide one of the first ex-post evaluations by examining the outcomes of a 2016 legislative initiative in Romania to tackle bogus self-employment. Reporting both descriptive statistics and OLS regression analysis on monthly official data from August 2014 to August 2016, the finding is that while other business types and waged employment rates followed a similar trend to the years before the introduction of the new legislation, the number of self-employed started a negative trend after the new legislation was announced. After controlling for other indicators related to the economy (i.e. GDP) and labor market (i.e. employees, other companies, vacancy rates), the impact of the new legislation on the self-employed remains negative, offering reasonable grounds for assuming bogus self-employed was lowered by the new legislation. The paper concludes by discussing the wider implications of these findings

Evaluating working conditions in the informal economy: evidence from the 2015 European Working Conditions Survey

Although it is widely held that working conditions in the informal economy are worse than in the formal economy, little evidence has been so far provided. The aim of this article is to fill this lacuna by comparing the working conditions of informal employees with formal employees using the 2015 European Working Conditions Survey. Multilevel mixed-effects logistic regression analysis provides a nuanced and variegated appreciation of which working conditions are worse for informal employees, which are no different, and which are better for informal than formal employees. The article concludes by discussing the theoretical and policy implications