TY  - JOUR
AB  - Purpose To transcend the long-standing debate regarding whether workers are driven into the informal economy by either their involuntary “exclusion” or voluntary “exit” from the formal economy, the purpose of this paper is to propose and evaluate the existence of a dual informal labour market composed of an exit-driven “upper tier” and an exclusion-driven “lower-tier” of informal workers, and to explore its policy implications.Design/methodology/approach To do so, data are reported from a 2015 survey of the informal economy conducted in South-East Europe involving 6,019 face-to-face interviews in Bulgaria, Croatia and FYR Macedonia.Findings Identifying a dual informal labour market with three exit-driven informal workers for every exclusion-driven informal worker, a multinomial logit regression analysis reveals that, compared to the exclusion-driven “lower tier”, the exit-driven “upper tier” is significantly more likely to be populated by the formally employed, retired and those not struggling financially. Participation is not affected by the perceived severity of penalties and likely risks of detection, but relative to those in the exclusion-driven “lower tier”, there is a significant correlation between those doing so for exit rationales and their lack of both horizontal trust and vertical trust in formal institutions.Practical implications The outcome is a call to transcend the conventional deterrence approach of increasing the penalties and risks of detection. Instead, to tackle those driven by exit rationales, tackling both the lack of horizontal trust that other citizens are operating in a compliant manner and the lack of vertical trust in formal institutions is advocated. To tackle exclusion-driven informal workers, meanwhile, a focus upon the macro-level economic and social conditions which lead to their participation is required.Originality/value This is the first paper to empirically evaluate the existence of a dual informal labour market and to evaluate its policy implications.
VL  - 40
IS  - 5
SN  - 0142-5455
DO  - 10.1108/ER-04-2017-0085
UR  - https://doi.org/10.1108/ER-04-2017-0085
AU  - Williams Colin Charles
AU  - Bezeredi Slavko
PY  - 2018
Y1  - 2018/01/01
TI  - Explaining and tackling the informal economy: a dual informal labour market approach
T2  - Employee Relations
PB  - Emerald Publishing Limited
SP  - 889
EP  - 902
Y2  - 2024/04/25
ER  -