https://doi.org/10.1515/esrp-2015-0029">
  •  
  •  
 
European Spatial Research and Policy

Abstract

Reporting a 2013 Eurobarometer survey of participation in the informal economy across eight Baltic countries, this paper tentatively explains the informal economy from an institutional perspective as associated with the asymmetry between the codified laws and regulations of the formal institutions (state morality) and the norms, values and beliefs of citizens (civic morality). Identifying that this non-alignment of civic morality with the formal rules is more acute when there is greater poverty and inequality, less effective redistribution and lower levels of state intervention in the labour market and welfare, the implications for theorising and tackling the informal economy are then discussed.

Keywords

informal sector, tax morale, social contract, institutional analysis, Baltics

Language

eng

References

ALM, J. and TORGLER, B. (2006), ‘Culture differences and tax morale in the United States and in Europe’, Journal of Economic Psychology, 27 (2), pp. 224–46.

ANDREWS, D., CALDERA SANCHEZ, A. and JOHANSSON, A. (2011), Towards a Better Understanding of the Informal Economy, Paris: OECD Economics Department Working, Paper no. 873, OECD.

BARBOUR, A. and LLANES, M. (2013), Supporting People to Legitimise their Informal Businesses, York: Joseph Rowntree Foundation.

BAUMOL, W. J. and BLINDER, A. (2008), Macroeconomics: principles and policy, Cincinnati, OH: South-Western Publishing.

CANNARI, L. and D’ALESSIO, G. (2007), Le Opiniomi degli Italiani sull’Evasione Fiscale, Rome: Temi di Discussione, Bank of Italy

CHARRON, N., DIJKSTRA, L. and LAPUENTE, V. (2014), ‘Mapping the regional divide in Europe: a measure for assessing quality of government in 206 European regions’, Social Indicators Research. DOI: 10.1007/s11205-014-0702-y.

DAUDE, C., GUTIERREZ, H. and MELGUIZO, A. (2013), ‘What drives tax morale? a focus on emerging economies’, Review of Public Economics, 207 (4), pp. 9–40.

DAVIS, M. (2006), Planet of Slums, London: Verso.

DE SOTO, H. (1989), The Other Path: the economic answer to terrorism, London: Harper and Row.

DE SOTO, H. (2001), The Mystery of Capital: why capitalism triumphs in the West and fails everywhere else, London: Black Swan.

DONG, B., DULLECK, U. and TORGLER, B. (2012), ‘Conditional corruption’, Journal of Economic Psychology, 33 (4), pp. 609–627

EUROFOUND (2013), Tackling Undeclared Work in 27 European Union Member States and Norway: approaches and measures since 2008, Dublin: Eurofound.

EUROPEAN COMMISSION (2007), Stepping up the Fight against Undeclared Work, Brussels: European Commission.

EUROPEAN COMMISSION (2013), Economic and Social Developments in Europe 2013, Brussels: European Commission.

EUROPEAN COMMISSION (2014a), Flash Eurobarometer 374. Business’ attitudes towards corruption in the EU, Brussels: European Commission.

EUREOPAN COMMISSION (2014b), Special Eurobarometer 397: Corruption, Brussels: European Commission.

EUROSTAT (2014a), GDP per capita in PPS, available at: http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&plugin=1&language=en&pcode=tec00114

EUROSTAT (2014b), Employment rate, available at: http://appsso.eurostat.ec.europa.eu/nui/submitViewTableAction.do

EUROSTAT (2014c), Implicit tax rate on labour, available at: http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&language=en&pcode=tec00119&plugin=0

EUROSTAT (2014d), Current taxes on income, wealth etc, available at: http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&language=en&pcode=tec00018&plugin=0

EUROSTAT (2014e), Income inequalities, available at: http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&language=en&pcode=tessi180&plugin=1

EUROSTAT (2014f), Severe material deprivation, available at: http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=ilc_mddd11&lang=en

EUROSTAT (2014g), Public expenditure on labour market interventions, available at: http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=lmp_expsumm&lang=en

EUROSTAT (2014h), Social protection expenditure, available at: http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=spr_exp_sum&lang=en

GALLIN, D. (2001), ‘Propositions on trade unions and informal employment in time of globalisation’, Antipode, 19 (4), pp. 531−549.

GEERTZ, C. (1963), Old Societies and New States: the quest for modernity in Asia and Africa, Glencoe, IL.: Free Press.

GIACHI, S. (2014), ‘Social dimensions of tax evasion: trust and tax morale in contemporary Spain’, Revista Española de Investigaciones Sociológicas, 145, pp. 73–98.

HELMKE, G. and LEVITSKY, S. (2004), ‘Informal institutions and comparative politics: a research agenda’, Perspectives on Politics, 2 (6), pp. 725–740.

ILO (2012), Statistical Update on Employment in the Informal Economy, Geneva: International Labour Organisation.

ILO (2013), Women and Men in the Informal Economy: statistical picture, available at: http://labor-sta.ilo.org/informal_economy_E.html (last accessed 18.12.2014).

ILO (2014), Transitioning from the informal to the formal economy. Report V (1), International Labour Conference, 103rd Session (2014), Geneva: ILO.

KANNIAINEN, V. and PAAKONNEN, J. (2010), ‘Do the catholic and protestant countries differ by their tax morale?’, Empirica, 37 (2), pp. 271–290.

KESTELOOT, C. and MEERT, H. (1999), ‘Informal spaces: the geography of informal economic activities in Brussels’, International Journal of Urban and Regional Research, 23 (2), pp. 232–251.

KUKK, M. and STAEHR, K. (2014), ‘Income underreporting by households with business income: evidence from Estonia’, Post-Communist Economies, 26 (2), pp. 257–266.

LAGO-PENAS, I. and LAGO-PENAS, S. (2010), ‘The determinants of tax morale in comparative perspective: Evidence from European countries’, European Journal of Political Economy, 26, pp. 441–453.

LEWIS, A. (1959), The Theory of Economic Growth, London: Allen and Unwin.

LONDON, T. and HART, S. L. (2004), ‘Reinventing strategies for emerging markets: beyond the transnational model’, Journal of International Business Studies, 35 (5), pp. 350-370.

MARTINEZ-VAZQUEZ, J. and TORGLER, B. (2009), ‘The evolution of tax morale in modern Spain’, Journal of Economic Issues, 43 (1), pp. 1–28.

McKERCHAR, M., BLOOMQUIST, K. and POPE, J. (2013), ‘Indicators of tax morale: an exploratory study’, e-Journal of Tax Research, 11 (1), pp. 5−22.

MERIKULL, J. and STAEHR, K. (2010), ‘Unreported employment and envelope wages in mid-transition: comparing developments and causes in the Baltic countries’, Comparative Economic Studies, 52, pp. 637–670.

MOLERO, J. C. and PUJOL, F. (2012), ‘Walking inside the potential tax evader’s mind: tax morale does matter’, Journal of Business Ethics, 105, pp. 151–162.

MURPHY, K. (2005), ‘Regulating more effectively: the relationship between procedural justice, legitimacy and tax non-compliance’, Journal of Law and Society, 32 (4), pp. 562–589.

NORTH, D. C. (1990), Institutions, Institutional Change and Economic Performance, Cambridge: Cambridge University Press.

NWABUZOR, A. (2005), ‘Corruption and development: new initiatives in economic openness and strengthened rule of law’, Journal of Business Ethics, 59(1/2), pp. 121–138.

OECD (2012), Reducing Opportunities for Tax Non-Compliance in the Underground Economy, Paris: OECD.

OECD (2014), Informal Entrepreneurship, Paris: OECD

PEDERSEN, S. (2003), The Shadow Economy in Germany, Great Britain and Scandinavia: a measurement based on questionnaire surveys, Copenhagen: The Rockwool Foundation Research Unit.

PFAU-EFFINGER, B. (2009), ‘Varieties of undeclared work in European societies’, British Journal of Industrial Relations, 47 (1), pp. 79–99.

PFEFFERMANN, D. (1993), ‘The role of sampling weights when modelling survey data’, International Statistical Review, 61 (2), pp. 317–337.

PUTNINS, T. and SAUKA, A. (2014a), ‘Measuring the shadow economy using company managers’, Journal of Comparative Economics,http://dx.doi.org/10.1016/j.jce.2014.04.001

PUTNINS, T. and SAUKA, A. (2014b), SSE Riga Shadow Index for the Baltic countries 2009–2013, Riga: SSE Riga.

RUSSO, F. F. (2013), ‘Tax morale and tax evasion reports’, Economics Letters, 121, pp. 110–114.

SCHNEIDER, F. (2008) (ed.), The Hidden Economy, Cheltenham: Edward Elgar.

SCHNEIDER, F. and WILLIAMS, C. C. (2013), The Shadow Economy, London: Institute of Economic Affairs.

SCOTT, W. R. (1995), Institutions and Organizations, Thousand Oaks CA: Sage

SHARON, L. and LIU, J. (1994), ‘A comparison of weighted and unweighted analyses in the National Crime Victimization Survey’, Journal of Quantitative Criminology, 10 (4), pp. 343–360.

SLAVNIC, Z. (2010), ‘Political economy of informalisation’, European Societies, 12 (1), pp. 3–23.

SOLON, G., HAIDER, S. J. and WOOLDRIDGE, J. (2013), What are we weighting for? Bucharest: National Bureau of Economic Research Working Paper No. 8.

TAIWO, O. (2013), ‘Employment choice and mobility in multi-sector labour markets: theoretical model and evidence from Ghana’, International Labour Review, 152, pp. 69–92.

TORGLER, B. and SCHNEIDER, F. (2007), Shadow economy, tax morale, governance and institutional quality: a panel analysis, Bonn: IZA Discussion Paper no. 2563, IZA.

TUC (2008), Hard Work, Hidden Lives: the short report of the Commission on Vulnerable Employment, London: TUC

WILLIAMS, C. C. (2009), ‘Evaluating the extent and nature of envelope wages in the European Union: a geographical analysis’, European Spatial Research and Policy, 16 (1), pp. 115–129.

WILLIAMS, C. C. (2014a), Confronting the Shadow Economy: evaluating tax compliance and behaviour policies, Cheltenham: Edward Elgar.

WILLIAMS, C. C. (2014b), ‘Explaining cross-national variations in the prevalence of envelope wages: some lessons from a 2013 Eurobarometer survey’, Industrial Relations Journal, 45 (6), 524–542.

WILLIAMS, C. C. (2014c), ‘Explaining cross-national variations in the prevalence and character of undeclared employment in the European Union’, European Spatial Research and Policy, Vol. 21, No. 2, pp. 115–132.

WILLIAMS, C. C. (2014d), ‘Out of the shadows: a classification of economies by the size and character of their informal sector’, Work, Employment and Society, 28 (5), pp. 735–753.

WILLIAMS, C.C. and HORODNIC, I. (2015), ‘Rethinking the marginalisation thesis: an evaluation of the socio-spatial variations in undeclared work in the European Union’, Employee Relations, 37 (1), pp. 48–65.

WILLIAMS, C. C., NADIN, S. and WINDEBANK, J. (2012), ‘Evaluating the prevalence and nature of self-employment in the informal economy: evidence from a 27-nation European survey’, European Spatial Research and Policy, 19 (1), pp. 129–142.

WINSHIP, C. and RADBILL, L. (1994), ‘Sampling weights and regression analysis’, Sociological Methods and Research, 23 (2), pp. 230–257.

First Page

127

Last Page

145

Language

eng

Share

COinS