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Book part
Publication date: 25 September 2023

Isa Mustafa, Justina Pula-Shiroka, Besnik A. Krasniqi, Veland Ramadani and Liridon Kryeziu

Informal entrepreneurship challenges sustainable economic performance and is a barrier to productive entrepreneurship. In this context, the level of development of formal and…

Abstract

Informal entrepreneurship challenges sustainable economic performance and is a barrier to productive entrepreneurship. In this context, the level of development of formal and informal institutions and their impact on informal entrepreneurship is crucial. This chapter examines the informal sector entrepreneurship in Kosovo using institutional theory lenses. Using a survey with 500 owners/managers of private companies, the study finds that the service industry has the highest participation in the informal economy compared to other sectors. On average small firms, compared to larger ones, report a higher percentage of unreported incomes. Our findings also suggest that when informal entrepreneurs perceive penalties for tax avoidance from tax authorities as high, they tend to have higher compliance with reporting their income. In addition, our findings indicate that the higher the vertical (trust in formal institutions) and horizontal distrust (trust in business partners), the higher the involvement in the informal economy. The chapter concludes with some policy implications for tackling the informal economy in Kosovo and similar institutional contexts.

Details

Entrepreneurship Development in the Balkans: Perspective from Diverse Contexts
Type: Book
ISBN: 978-1-83753-455-5

Keywords

Book part
Publication date: 19 May 2009

Rina Agarwala

Purpose – This chapter illustrates how an economic sociology of work exposes the deeply embedded nature of the informal economy and the social and political lives of its growing…

Abstract

Purpose – This chapter illustrates how an economic sociology of work exposes the deeply embedded nature of the informal economy and the social and political lives of its growing mass of unprotected workers under globalization. In particular, the premises of economic sociology offer a comprehensive definition of the informal economy that I term, “relational.” In contrast to definitions based on modernization and neoliberal assumptions of isolated economies, relational definitions of the informal economy expose the structures, networks, and political institutions that intertwine informal workers with the formal economy, society, and the state. Operationalizing the relational definition in labor surveys ensures the inclusion of previously invisible informal workers, especially those who operate at the intersection of the informal and formal economy. As well, it ensures the collection of data on the precise ways in which informal workers are socially and politically embedded, including their collective action efforts, the meaning they attach to their labor, and the social networks that determine their life chances.

Methodology – To illustrate this point, I apply a relational definition of informal labor to the case of India, using the National Sample Survey on Employment and Unemployment, as well as findings from interviews with organized informal workers.

Findings – By doing so, I provide an internationally comparative measure of India's informal workforce, illustrate informal workers’ social conditions relative to those of formal workers, highlight the expansion of the informal workforce since the government enacted liberalization reforms, and expose the unique political action strategies Indian informal workers are launching against the state.

Implications/Originality – These findings help us understand Indian informal workers in an internationally comparative context, yielding empirical insights on their social conditions and political organizations for the first time. As well, they call for an important refinement to existing definitions of the informal economy that to date have relied only on Latin American and African experiences.

Details

Economic Sociology of Work
Type: Book
ISBN: 978-1-84855-368-2

Book part
Publication date: 19 December 2017

Michael Rogan, Sally Roever, Martha Alter Chen and Françoise Carré

In this chapter, we aim to illustrate some of the forms taken by informal employment in the global south and how these can best be understood by adopting a wider analytical lens…

Abstract

In this chapter, we aim to illustrate some of the forms taken by informal employment in the global south and how these can best be understood by adopting a wider analytical lens than has been applied in much of the precarious employment literature. We draw on the findings of a recent study of the working conditions of urban informal workers from 10 cities in the global south. The study consisted of focus groups (15 in each city) conducted through the framework of a participatory informal economy appraisal as well as a survey of 1,957 home-based workers, street vendors, and waste pickers. Our findings illustrate a number of ways in which these three groups of informal workers are embedded within the formal economy. While they are not engaged in wage employment, they play subordinate roles to both formal sector firms within global production networks and unequal production relations and to the state through, inter alia, constrained access to public spaces and regulation. In order to interpret these findings, we apply Agarwala’s (2009) “relational” lens to demonstrate how risks and costs are transferred to workers who constitute the “real economy” in much of the global south. Given the often disguised connections between informal employment and the formal economy, this approach also provides a bridge to understanding precarious working conditions and the effects of globalization outside of the industrialized north.

Article
Publication date: 31 May 2023

Toan Khanh Tran Pham

The studies that explore the impacts of national intellectual capital on informal economy are scant. Moreover, the effect of an external factor such as institutional quality that…

Abstract

Purpose

The studies that explore the impacts of national intellectual capital on informal economy are scant. Moreover, the effect of an external factor such as institutional quality that moderates this relationship has largely been neglected in previous studies. Institutions are considered important pillars to accumulate national intellectual capital and reduce shadow economy. As such, this paper aims to investigate how institutional quality moderates the effects of national intellectual capital on informal economy in 17 Asian countries from 2000 to 2018.

Design/methodology/approach

This paper uses the generalized method of moments techniques, which allow cross-sectional dependence and slope homogeneity in panel data, to examine the moderating role of institutional quality on the relationship between national intellectual capital and informal economy. Various tests are conducted to ensure the robustness of the findings.

Findings

Empirical findings from this paper indicate that an increase in national intellectual capital and institutional quality declines the informal economy. Interestingly, better institutional quality aggravates the negative effects of national intellectual capital on reducing the size of informal economy. The author also finds that enhancing international trade and economic growth results in a decrease in the informal economy in Asian countries.

Practical implications

Empirical findings offer policymakers an indication of the relationships between national intellectual capital, institutional quality and informal economy, pointing out that national intellectual capital and institutional quality should be strengthened to allow Asian countries to limit the informal economy.

Originality/value

This study provides a conceptual model through which the moderating role of institutional quality on the national intellectual capital–informal economy nexus can be recognized. This approach has thus far not been investigated in the existing literature. To the best of the author’s knowledge, this study makes an original contribution to the empirical of national intellectual capital and informal economy nexus and produces new insights into the fields of the moderating effects of institutional quality on this nexus.

Details

Competitiveness Review: An International Business Journal , vol. 34 no. 2
Type: Research Article
ISSN: 1059-5422

Keywords

Article
Publication date: 27 April 2023

Marina Arnaut, James Temitope Dada, Akinwumi Sharimakin and Mamdouh Abdulaziz Saleh Al-Faryan

Several studies have examined the effect of formal economy (usually proxy by economic growth) on environmental quality; however, the symmetric and asymmetric impact of the informal

Abstract

Purpose

Several studies have examined the effect of formal economy (usually proxy by economic growth) on environmental quality; however, the symmetric and asymmetric impact of the informal economy on environmental quality has not been examined in Nigeria. Therefore, this study aims to explore the short- and long-run (a)symmetric effect of formal and informal economies and financial development on Nigeria’s environmental quality between 1984 and 2017.

Design/methodology/approach

The study uses ecological footprint to measure environmental quality. An increase in ecological footprint suggests a fall in environmental quality. Informal economy is calculated as a percentage of GDP using the currency demand approach. Autoregressive distributed lag (ARDL), nonlinear ARDL cointegration framework and vector error correction granger causality are used as estimation techniques.

Findings

The study’s outcomes establish the existence of asymmetric structure in the link between economic activities and the environment both in the short and long run. The asymmetric results reveal that positive and negative changes in the formal economy increase the ecological footprint in both periods. Hence, activities in the formal economy reduce environmental quality. On the other hand, positive and negative changes in the informal economy only positively influence the ecological footprint in the long run. In contrast, it negatively impacts the ecological footprint in the short run. This suggests that activities in the informal economy worsen the long-run environmental quality. Financial development has a positive influence on the ecological footprint, thus degrading the environmental quality. Furthermore, in the short run, a unidirectional relationship from the formal economy to the ecological footprint, while a bidirectional causality exists between informal and formal economies. Meanwhile, a unidirectional causality from the (in)formal economies and financial development to the ecological footprint was found in the long run.

Practical implications

The outcome of this study shows that both informal and formal economies contribute to ecological footprint; therefore, mainstreaming the informal economy into the formal economy will further increase the problem of environmental degradation and worsen environmental quality.

Originality/value

The study investigates the symmetric and asymmetric effect of formal and informal economies on environmental quality in Nigeria, which is largely missing in the empirical literature.

Details

Society and Business Review, vol. 18 no. 4
Type: Research Article
ISSN: 1746-5680

Keywords

Open Access
Article
Publication date: 12 November 2020

Aleksandra Webb, Ronald McQuaid and Sigrid Rand

Although the coronavirus (COVID-19) pandemic appears to disproportionately affect those in informal employment, they often receive less government support than the formally…

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Abstract

Purpose

Although the coronavirus (COVID-19) pandemic appears to disproportionately affect those in informal employment, they often receive less government support than the formally employed. This paper considers definitions of the informal economy and informal employment, explores the rationale for participating in the informal economy and reflects on some effects of the pandemic on these workers.

Design/methodology/approach

The paper presents a narrative literature review with analysis of the selected academic and policy literature.

Findings

There are considerable short- and long-term implications of the pandemic for informal employment and the informal economy. This occurs against the background of unresolved tensions arising from informal workers' desire for more employment security and employers' striving for continued labour flexibility while transferring costs to government and workers. The COVID-19 pandemic might accelerate current trends and force new solutions to better protect basic work security while helping organisations to remain competitive. Government policies supporting work safety, income security, moves to formalisation of employment and fairness for informal employees are particularly important.

Research limitations/implications

As statistical and qualitative evidence is currently limited, it is too early to identify the full effects of COVID-19 on employment in the informal economy.

Practical implications

The results suggest that governments need to carefully consider explicit support for those in informal employment to create fair, resilient and ethical structures for workers, businesses, economies and wider societies.

Social implications

The paper identifies some of the social implications of COVID-19 for the informal sector.

Originality/value

The analysis offers initial insights into the impacts of a major health, economic and social shock on informal working.

Details

International Journal of Sociology and Social Policy, vol. 40 no. 9/10
Type: Research Article
ISSN: 0144-333X

Keywords

Article
Publication date: 15 February 2016

Colin C Williams and Ioana Alexandra Horodnic

The purpose of this paper is to advance a new explanation for cross-country variations in the participation of small businesses in the informal economy. Drawing upon institutional…

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Abstract

Purpose

The purpose of this paper is to advance a new explanation for cross-country variations in the participation of small businesses in the informal economy. Drawing upon institutional theory, it proposes that the greater the asymmetry between the codified laws and regulations of formal institutions (state morality) and the unwritten socially shared rules of informal institutions (civic morality), the greater is the propensity of small businesses to participate in the informal economy. To analyse this, the extent to which small businesses evade payroll taxes by paying employees an undeclared (envelope) wage in addition to their official declared salary is analysed.

Design/methodology/approach

To evaluate this, data are reported from a 2013 Eurobarometer survey involving 5,174 face-to-face interviews with employees in small businesses across the 28 member states of the European Union (EU-28).

Findings

The finding is that small businesses display a greater propensity to engage in this informal wage practice in countries where there is a higher degree of asymmetry between the codified laws and regulations of formal institutions (state morality) and the unwritten socially shared rules of informal institutions (civic morality). A multi-level logistic regression analysis reveals these to be countries which have lower qualities of governance, lower levels of taxation and intervention in the labour market and less effective social transfer systems.

Research limitations/implications

The major limitation of this study is that it has only examined whether employees in small businesses receive informal wages. Future cross-country surveys should analyse a wider range of ways in which small businesses participate in the informal economy such as under-reporting turnover.

Originality/value

This is the first known analysis of cross-country variations in the participation of small businesses in the informal economy.

Details

Journal of Small Business and Enterprise Development, vol. 23 no. 1
Type: Research Article
ISSN: 1462-6004

Keywords

Article
Publication date: 27 June 2008

Sola Fajana

This paper aims to address the issue of unionisation of the largely non‐unionised informal economic activities as a strategy for achieving decent work and pay as well as promoting…

2281

Abstract

Purpose

This paper aims to address the issue of unionisation of the largely non‐unionised informal economic activities as a strategy for achieving decent work and pay as well as promoting national development in Nigeria.

Design/methodology/approach

The adopted methods include review of archival information and survey of the perspectives of the stakeholders in Nigeria's industrial relations system. To facilitate the realisation of expected developmental objectives, monitoring, evaluation, capacity building, organising and advocacy roles are recommended jointly and severally for the stakeholders.

Findings

It was found that decent work and pay, which would assist poverty minimisation and thus national development, would be furthered by unionisation of the informal sector. At the same time, there are many barriers faced by unions in seeking to organise in the latter area.

Research limitations/implications

The research focuses only on aspects of informal working; the informal economy represents a multi‐facetted and spatially diverse phenomenon.

Originality/value

This paper provides a detailed review of employment relations in non‐standard work in Africa, an area much neglected in the literature.

Details

Employee Relations, vol. 30 no. 4
Type: Research Article
ISSN: 0142-5455

Keywords

Article
Publication date: 1 October 2000

Leo McCann

Presents a unique view of informality within the government of Tatarstan which challenges the notion that these forms can be dismissed as simply corruption. Focuses on interviews…

7514

Abstract

Presents a unique view of informality within the government of Tatarstan which challenges the notion that these forms can be dismissed as simply corruption. Focuses on interviews with investors and businessmen, showing how informality can be an important factor in the reproduction of elite classes. Limits the article to the unique dynamics of the transition from command economy to free market economy but provides resonance with the experiences of those who have worked in many third‐world societies.

Details

International Journal of Sociology and Social Policy, vol. 20 no. 9/10
Type: Research Article
ISSN: 0144-333X

Keywords

Article
Publication date: 10 May 2021

Amine Abi Aad and James G. Combs

We raise and address an unexamined research question: Why do managers place some business activities in the formal economy and others in the informal? This firm-level managerial…

Abstract

Purpose

We raise and address an unexamined research question: Why do managers place some business activities in the formal economy and others in the informal? This firm-level managerial choice is most visible in emerging economies and is important due to its performance implications.

Design/methodology/approach

We theorize that managers use social ties with formal institutions (e.g. parliament, central bank) to protect against (1) being singled out for enforcement and (2) opportunistic business partners, and that these protections allow managers to conduct more activities in the informal economy. Based on regulatory focus theory, we also submit that managers with a promotion (prevention) focus mindset are more (less) prone to use their social ties with formal institutions to emphasize the informal economy. Hypotheses are tested using survey data from 362 Lebanese top managers.

Findings

Managers' social ties with formal institutions relate positively to their propensity to use the informal economy, and managers with a promotion mindset are more willing and those with a prevention mindset are less willing to leverage their social ties with formal institutions to conduct activities in the informal economy.

Originality/value

Our study raises an important new research question at the intersection of strategic and international management and offers an initial answer. Working within the informal economy requires informal social ties among informal actors, but for formally registered firms, entry into the informal economy requires informal ties with formal actors.

Details

Cross Cultural & Strategic Management, vol. 28 no. 3
Type: Research Article
ISSN: 2059-5794

Keywords

1 – 10 of over 37000