1. TACKLING THE INFORMAL ECONOMY AND UNDECLARED WORK IN SOUTHEAST EUROPE: KNOWLEDGE INFORMED POLICY RESPONSES ON THE EXAMPLE OF BULGARIA, CROATIA, AND FYR OF MACEDONIA
Ruslan Stefanov
Marie Curie Research Fellow
University of Sheffield / Vitosha Research EOOD
Zagreb
September 1, 2017

2. Key GREY findings
Informal economy and undeclared work are socially accepted and widely practiced in SEE
1 in 5 adults have bought goods and services from the informal economy
1 in 12 have worked in it
1 in 10 of the employed have received envelope wages
Undeclared work differs across and within the three countries. For every one excluded from the formal economy, there are three that choose to exit it.
Institutional asymmetry and non-alignment between formal and informal institutions provide better explanation of undeclared work’s prevalence in Southeast Europe compared to more traditional rational cost-benefit optimization models for workers and employers
Policy makers need to prioritise measures to improve vertical (in institutions) and horizontal (among people) trust, complementing measures to improve detection and deterrence.
EU can be a considerable positive factor: European Platform Tackling UDW

3. Macroeconomic overview
GDP per capita at PPP as % of EU-28 Average: BG - 48%, HR- 59%, FYROM - 38%
Cash strapped / constrained governments
Structural difficulties on the labour market:
Shrinking population
Low employment
High long-term and youth unemployment

4. Demand side

5. Propensity to buy into the informal economy

6. Rationale for buying undeclared

7. If they are doing in, I can do it too

8. Repressive measures can only produce limited effect

9. Vertical trust issues need to be tackled with priority

10. Supply side

11. Working into the informal economy

12. Exit vs. exclusion driven participation in the informal economy

13. Detection and sanctions are unlikely to have high effect on the supply side

14. Building horizontal and vertical trust should be prioritized on the supply side

15. Envelope wages

16. Prevalence of envelope wages in SEE

17. Some considerations from the wider perspective and region

18. Pulling strings in SEE

19. Diversity of working informally

21. Demographics of working in the informal economy
slightly younger
male – more than average employed
work more (longer) at job and at home (and private farm)
tend to know more people also part of the hidden economy
are more relaxed (not judgmental) towards morale in society
subjective feeling of happiness is slightly lower, but self esteem is ok

22. People in working informally subject to higher corruption pressure

23. Policy Recommendations
Strengthen the broader institutional foundations
Improve the quality of public goods and services
Restore social solidarity and reduce inequality
Reduce the gap between citizens and the state

24. Thank you! Ruslan.Stefanov@CSD.BG