‘The price is different depending on whether you want a receipt or not’: examining the purchasing of goods and services from the informal economy in South-East Europe

ABSTRACT

Research on the informal economy has largely focussed on supply-side issues, addressing questions like what motivates individuals to work in the informal economy and how can governments tackle this phenomenon. To date, much less attention has been given to demand-side aspects, examining issues around who purchases goods and services from the informal economy, why, and to what extent there are variations according to demographic, socio-economic and geographic dimensions. This paper addresses this imbalance by examining the purchasing of goods and services from the informal economy in South-East Europe. Firstly, this paper identifies the prevalence of such informal purchasing in South-East Europe as well as who undertakes such purchasing. Next, it examines the relative significance of cost factors, social factors and failures in the formal economy, in motivating such purchasing. Finally, it explores variability in the significance of these motivators based on individual-level factors, within and across three South-East European countries.

KEYWORDS:

• Informal economy
• services
• demand-side
• South-East Europe

Acknowledgements

The authors would like to thank the funders for providing the financial support to enable the research and writing of this academic article.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. All main criteria for selecting the optimal number of factors, e.g. the Kaiser with eigenvalues, the Kaiser–Meyer–Olkin (KMO), loading suggests that there is only one main factor should be considered. Our results are robust to the use of each six items.

2. The marginal effect reflects the change in the probability of y = 1 given a 1 unit change in the independent variable x. For categorical independent variables, the marginal effect is expressed in comparison to the base category (x = 0) e.g. gender. For continuous independent variables, the marginal effect is expressed for a one-unit change in x. e.g. tax morality.

3. This percentage is calculated by multiplying the marginal effect score by 100.

Additional information

Funding

The authors would like to acknowledge that this article was developed using data collected during a research project [grant no. 611259] entitled ‘Out of the shadows: developing capacities and capabilities for tackling undeclared work in Bulgaria, Croatia and FYR Macedonia’ (GREY), funded by the Marie Curie European Commission’s Framework 7 Industry-Academia Partnerships Programme (IAPP).