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The purpose of this paper is to evaluate who engages in informal work. The intention in doing so is to analyse whether important causal factors of social exclusion such as age, education, gender and employment status influence participation in informal work in the European Union.

To do this, a 2013 Eurobarometer survey of who participates in undeclared work in 28 European member states is reported.

Using multilevel mixed-effects logistic regression analysis, the finding is that although some marginalised groups (the unemployed, those having difficulties paying their household bills, the working class and younger age groups) are significantly more likely to participate in the informal sector, others are not (those with less formal education and living in rural areas) and yet others (women and people in deprived European regions) are significantly less likely to participate.

The outcome is a call for a nuanced and variegated understanding of the relationship between participation in the informal sector and social exclusion.

These results display the specific populations that need targeting when seeking to tackle informal work, revealing for example that the current the allocation of European funds for tackling informal work in poorer EU regions is mistaken, but that the targeting of the unemployed is not and current policy initiatives such as smoothing the transition from unemployment to self-employment worthwhile.

This is the first extensive evaluation of the relationship between participation in the informal sector and social exclusion at the level of the European Union

Conventionally, participation in the informal economy has been explained by viewing citizens as rational economic actors participating when the pay-off is greater than the expected cost of being caught and punished, and thus tackled by raising the sanctions and risks of detection. Given that many citizens do not engage even when the benefits outweigh the costs, a new social actor approach has begun to emerge which explains the informal economy as arising when tax morality is low and seeks to foster commitment to compliance. The purpose of this paper is to provide an evidence-based evaluation of these competing policy approaches.

To do so, the results are reported of 1,306 face-to-face interviews undertaken during 2013 in the UK.

The finding is that raising the sanctions and risks of detection has no significant impact on the likelihood of participation in the informal sector. However, participation in the informal economy is significantly associated with tax morality. Indeed, the only time that increasing the sanctions and risks of detection reduces the level of participation in the informal economy is amongst citizens with very low tax morality.

Rather than continue with the current rational economic actor approach of increasing the penalties and risks of detection, this case study of the UK reveals that a new policy approach is required that seeks to improve tax morality by introducing measures to reduce the acceptability of participating in the informal economy. Whether this is more widely applicable now needs to be tested, given the dominance throughout the world of this punitive rational economic actor approach.

This paper provides evidence supporting a new social actor approach towards explaining and tackling participation in the informal economy.

When tackling the informal economy, an emergent literature has called for the conventional rational economic actor approach (which uses deterrents to ensure that the costs of undeclared work outweigh the benefits) to be replaced or complemented by a social actor approach which focusses upon improving tax morale. The purpose of this paper is to explore the effectiveness of these two policy approaches in reducing informal sector entrepreneurship.

To evaluate this, data are reported from a 2015 representative survey involving 1,384 face-to-face interviews with owners or managers of small businesses in three South-Eastern European countries, namely, Croatia, Bulgaria and FYR Macedonia.

The findings provide support for the “social actor” approach and display that small businesses have a greater propensity to perceive competitors as operating informally when the level of tax morale is lower. Meanwhile, no support for the deterrence measures of the “rational economic actor” model is reported.

The major limitation of the study is that the paper is not able to display the reasons for the low level of tax morale and horizontal trust. Therefore, further in-depth qualitative research is necessary to explain whether and how the low levels of trust are determined by the failures of various formal institutions.

This is the first known study on small businesses which analyses simultaneously two distinct policy approaches that aim to reduce participation in informal entrepreneurship.

The purpose of this paper is to conduct a systematic review of the factors that shape tax morale. A large range of random explanatory variables identified in the literature as determinants of tax morale are synthesised and structured by drawing inspiration from the institutional theory.

To do this, a systematic search has been conducted using a library catalogue which provides access to more than 400 databases.

The finding is that the institutional theory provides a suitable theoretical basis to explore tax morale. Indeed, all the factors until now identified as determinants of tax morale (except the control variables/socio-demographic characteristics) can be categorised either as belonging to formal institutions or to informal institutions. The most salient factor is trust, with both vertical and horizontal trust positively related to tax morale.

The outcome is a call for a more nuanced understanding of not only the effect of formal and informal institutions on tax morale but also how formal and informal institutions interact and alter each other and, consequently, affect tax morale.

The paper seeks to encourage governments to start recognising that as low tax morale arises when a gap exists between formal and informal institutions, they need to design policy measures aimed to reduce this gap, rather than persisting with deterrence measures.

This is the first systematic review of the factors that influence tax morale using an institutionalist lens.

To transcend the current debates about whether participation in the informal sector is a result of informal workers “exclusion” or their voluntary “exit” from the formal sector, 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 exclusion-driven “lower-tier” of informal workers.

To do this, data from a 2013 Eurobarometer survey involving 27,563 face-to-face interviews across the European Union is reported.

The finding is that in the European Union, there is a dual informal labour market with those participating in the informal sector due to their exclusion from the formal sector being half the number of those doing so to voluntarily exit the formal sector. Using a logistic regression analysis, the exclusion-driven “lower tier” is identified as significantly more likely to be populated by the unemployed and those living in East-Central Europe and the exit-driven “upper tier” by those with few financial difficulties and living in Nordic nations.

The results reveal the need not only to transcend either/or debates about whether participants in the informal sector are universally exclusion-or exit-driven, and to adopt a both/and approach that recognises a dual informal labour market composed of an exit-driven upper tier and exclusion-driven lower tier, but also for wider research on the relative sizes of these two tiers in individual countries and other global regions, along with which groups populate these tiers.

This is the first evaluation of the internal dualism of the informal sector in the European Union.

To tackle one of the main negative consequences of the sharing economy, namely, the growth of the informal sector, the purpose of this paper is to evaluate for the first time the impacts of the informal sector on the hospitality industry and then to discuss what needs to be done to prevent the further growth of the informal sector in this industry.

To evaluate the impacts of the informal sector on the hospitality industry, data are reported from 30 East European and Central Asian countries collected in 2013 in the Business Environment and Enterprise Performance Survey.

The finding is that 23 per cent of hotels and restaurants in Eastern Europe and Central Asia report competing against unregistered or informal operators, and 13 per cent view these informal competitors as a major or severe obstacle. The larger the business, the greater is the likelihood that the informal sector is considered their biggest obstacle.

To prevent the further growth of the informal sector in the hospitality industry, regulation of the sharing economy will be required. To achieve this, it is shown that state authorities need to adopt both direct control measures that alter the costs of operating in the informal sector and the benefits and ease of operating formally, as well as indirect control measures that reduce the acceptability of operating in the informal sector.

This is the first paper to evaluate the impacts of the informal sector on the hospitality industry and to outline the policy measures required to prevent its further growth with the advent of the sharing economy.

Participation in the informal economy has been predominantly explained from a supply side perspective by evaluating the rationales for people working in this sphere. Recognising that many transactions in the informal economy are often instigated by customers, exemplified by purchasers asking “how much for cash?”, the purpose of this paper is to explain the informal economy from a demand-side perspective by evaluating citizens’ rationales for making purchases in the informal economy. Here, the authors test three potential explanations for acquiring goods and services in the informal economy, grounded in rational economic actor, social actor and formal economy imperfections theoretical perspectives.

To do this, a 2013 Eurobarometer survey, involving 27,563 face-to-face interviews conducted in 28 European Union member states is reported.

The finding is that all three rationales apply but the weight given to each varies across populations. A multinomial logit regression analysis then pinpoints the specific groups variously using the informal economy to obtain a lower price, for social or redistributive rationales, or due to the failures of the formal economy in terms of the availability, speed and quality of provision.

The outcome is to reveal that the conventional policy approach of changing the cost/benefit ratios confronting purchasers will only be effective for those purchasers citing a lower price as their prime rationale. Different policy measures will be required for those making informal economy purchases due to the shortcomings of the formal economy, and for social ends. These policy measures are then discussed.

The value and originality of this paper is that it explains participation in the informal economy from a purchaser, rather than the predominant supplier, perspective.

In recent years, there has been a concern that employers are falsely classifying employees as self-employed to evade collective agreements and labour laws (e.g. minimum wages, working time legislation and protection in case of redundancy), and the result is that these dependent self-employed suffer poorer working conditions. The purpose of this paper is to provide an extensive evaluation of the working conditions of those in dependent self-employment compared with the genuine self-employed.

To do so, data are reported from a 2015 European Working Conditions Survey of 35,765 workers in 28 European Union member states.

Of the 4.3 per cent of the working population found to be in dependent self-employment, the finding is that they have similar working conditions to the genuine self-employed in terms of their physical and social environment and intensity of work. However, they have poorer job prospects and less ability to use their skills and discretion than the genuine self-employed. In terms of the working time quality, meanwhile, the finding is that they have better conditions than the genuine self-employed. Therefore, this analysis uncovers the need for a more nuanced understanding of the relative working conditions of the dependent self-employed.

If the working conditions of the dependent self-employed are to be tackled, evaluation is now required of whether the current policy approaches, such as developing a hybrid category of employment with legal rights attached, address the specific working conditions that are worse for the dependent self-employed.

This is one of the few papers which provides an extensive evaluation of the working conditions of those in dependent self-employment in the EU28.

France is a model of best practice in the European Union as regards policy to combat undeclared work. The purpose of this paper is to take the country as a case study to evaluate the competing explanations of why people engage in undeclared work which underpin such policy, namely, the dominant rational-economic-actor approach and the more recent social-actor approach.

To evaluate these approaches, the results of 1,027 interviews undertaken in 2013 with a representative sample of the French population are analysed.

The finding is that higher perceived penalties and risks of detection have no significant impact on the likelihood of conducting undeclared work in France. In contrast, the level of tax morale has a significant impact on engagement in the activity: the higher the tax morale, the lower is the likelihood of participation in the undeclared economy. Higher penalties and risks of detection only decrease the likelihood of participation in undeclared work amongst the small minority of the French population with very low tax morale.

Current policy in France to counter undeclared work is informed principally by the rational-economic-actor approach based on a highly developed infrastructure for detection and significant penalties alongside incentives to declare small-scale own-account work. The present analysis suggests that this approach needs to be supplemented with measures to improve citizens’ commitment to compliance by enhancing tax morale.

This case study of a country with a well-developed policy framework to combat undeclared work provides evidence to support the social-actor approach for informing policy change.

Grounded in an emergent recognition that those people in formal employment conduct the vast majority of work in the shadow economy, the purpose of this paper is to evaluate for the first time the degree to which shadow work is conducted by those in formal jobs and the characteristics of those in formal employment who participate in the shadow economy.

To do this, the authors report a 2007 survey of participation in the shadow economy involving 26,659 face-to-face interviews conducted in 27 European Union (EU) member states.

The finding is that in the EU, the formally employed undertake a disproportionate share of work in the shadow economy. Analysing the characteristics of the employed most likely to work in the shadow economy, however, it is those who benefit least from the formal economy, namely, younger unmarried men and on lower incomes living in rural areas, working in the construction sector and in small firms.

The outcome is a tentative call for recognition that although people in formal employment conduct the vast majority of work in the shadow economy, these are mostly particular vulnerable and weaker groups of the formally employed. Whether similar findings prevail at other spatial scales and in other global regions now needs investigating.

This survey displays the need for policy not to target the unemployed but particular groups of the formally employed.

The first extensive evaluation of the extent to which shadow work is conducted by those in formal jobs and the characteristics of those in formal employment who participate in the shadow economy.