Informal economy and welfare state programs in Kosovo

The purpose of our study is to explore an assumed negative relationship between economic informality and welfare state expenditure in the case of Kosovo. We do that by comparing Kosovo‟s indicators of informal economy and welfare state policies with those of 28 other European countries. We then zoom in on Kosovo‟s case by using relevant studies, reports and material gathered in eight semi-structured interviews with representative of institutions whose work is related to the subjects of study. We discuss informal economy in relation with welfare state policies, institutional asymmetry and social capital in post-socialist societies. We provide statistical evidence that countries with larger informal economy are more likely to have poorer welfare state programs, lower social capital and higher institutional asymmetry. Results show that Kosovo fits the theoretical model. Nevertheless, although data do suggest that such a relationship exists, we could not provide evidence disentangling causal directions or their relative intensities