Purpose
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.
Design/methodology/approach
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.
Findings
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.
Research limitations/implications
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.
Originality/value
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 aim of this paper is to evaluate the extent of the practice of using informal payments for accessing the services of public clinics or hospitals across Europe and to explain the prevalence of ...this corrupt practice using the framework of institutional theory. To achieve this, a multi-level mixed-effect logistic regression on 25,744 interviews undertaken in 2020 with patients across 27 European Union countries is conducted. The finding is that the practice of making informal payments remains a prevalent practice, although there are large disparities in the usage of this practice in different European countries. However, informal payments by patients are more likely when there is a lower institutional trust and a higher degree of asymmetry between formal and informal institutions. The resultant proposal is that policy makers need to address the institutional environment to tackle such informal payments. How this can be achieved is outlined.
Institutional theory has explained informal employment to result from formal institutional failings. The aim of this paper is to identify the formal institutional failings associated with informal ...employment so that action can be taken by governments. Using the Tobit model for econometric analysis and reporting conditional and unconditional marginal effects of the 2021 Balkans Business Barometer survey conducted in six Western Balkan economies (Albania, Bosnia and Herzegovina, Kosovo, North Macedonia, Montenegro and Serbia), the contribution of this paper is to reveal that the perceived incidence and share of informal employment is significantly associated with businesses perceiving governance, public integrity and corruption as very negative or negative, the perception that the government does not consider business concerns and business dissatisfaction with public services. However, the perceived incidence and share of informal employment is not significantly associated with the views of business on tax rates and tax administration, or the perceived instability and lack of predictability of government. The theoretical and policy implications are then discussed.
In this paper, we use a novel cross‐country dataset to investigate the relationship between the prevalence of the shadow economy and fiscal policy responses to the economic crisis induced by the ...pandemic. The finding is that countries with a relatively larger shadow economy before the pandemic have adopted a smaller fiscal policy package. The results are robust to different econometric specifications, including an instrumental variable estimation. This reinforces the wider literature that countries (especially those with larger shadow economies) generally follow a procyclical policy as opposed to the optimal and countercyclical one.
Healthcare accessibility and equity remain important issues, as corruption in the form of informal payments is still prevalent in many countries across the world. This study employs a panel data ...analysis over the 2006-2013 period to explore the role of different institutional factors in explaining the prevalence of informal payments. Covering 117 countries, our findings confirm the significant role of both formal and informal institutions. Good governance, a higher trust among individuals, and a higher commitment to tackling corruption are associated with diminishing informal payments. In addition, higher shares of private finance, such as out-of-pocket and domestic private health expenditure, are also correlated with a lower prevalence of informal payments. In policy terms, this displays how correcting institutional imperfections may be among the most efficient ways to tackle informal payments in healthcare.
Drawing inspiration from institutional theory, a small sub-stream of literature has proposed that participation in the informal economy arises from the lack of alignment of a society’s formal ...institutions (i.e. its codified laws and regulations) with its informal institutions (i.e. the norms, values and beliefs of its population). To further advance this explanation, this article reports a 2013 Eurobarometer survey involving 27,563 face-to-face interviews across 28 European countries. The finding is that there is a strong association between the degree to which formal and informal institutions are unaligned and participation in the informal economy. The greater is the asymmetry between the formal and informal institutions, the more likely is participation in the informal economy at the individual-, population group- and country-level. A new policy approach for tackling the informal economy which focuses upon reducing this institutional incongruence is then discussed.
The aim of this paper is to evaluate the impact on service sector businesses of competitors' undeclared work practices and the policy measures service enterprises perceive as most effective in ...tackling such noncompliant behaviour. The results of a survey with 1,130 service sector businesses reveals that illegal competition is the most common major obstacle for their activity and more than a half are severely affected by competitors undertaking undeclared work. However, the proportion of businesses perceiving competitors undertaking undeclared work as a major obstacle varies across different service industries, as do the policy measures that businesses view as required to tackle undeclared work. The paper concludes by discussing the policy implications and calling for a shift from the dominant deterrence approach aimed at eradicating undeclared work to measures aimed at supporting the transition to declared work.
When examining the motivations of entrepreneurs, it has become commonplace to represent them dichotomously as either necessity- or opportunity-driven. In recent years, an emergent literature has ...criticized this simplistic necessity/opportunity dichotomy by revealing not only how both necessity and opportunity are often co-present in entrepreneurs' motives but also how their complex motives can shift over time. This paper furthers this emergent literature by unravelling how entrepreneurs and potential entrepreneurs' motives are directly influenced by the socio-spatial context in which operate. To evaluate the socio-spatial contingency of entrepreneurial motivations, a case study is here reported of the drivers underpinning entrepreneurial endeavour in English deprived urban neighbourhoods (DUNs). The results of a face-to-face interviews with 459 participants followed up by a further 18 in-depth interviews, this study reveals that entrepreneurs' motives in DUNs are complex, combining necessity and opportunity drivers, with the balance shifting over time in direct response to the changing fortunes of, and possibilities in, the locality in which they work and live, which has directly impacts on their perceptions of what is possible and feasible. This paper concludes by calling for greater recognition of the socio-spatial contingency of motivations followed by the implications for both theory and policy.
Varieties of context and informal entrepreneurship Afreh, Benjamin; Rodgers, Peter; Vershinina, Natalia ...
International journal of entrepreneurial behaviour & research,
08/2019, Letnik:
25, Številka:
5
Journal Article
Recenzirano
Purpose
The purpose of this paper is to examine the multi-faceted contexts, which influence the motives, decisions and actions that underpin the mundane and lively entrepreneurial practice of migrant ...youth entrepreneurs (MYEs) within a developing economy context. Moreover, the paper explores the under-researched linkages between migration and informal entrepreneurship.
Design/methodology/approach
Inductive, qualitative field data from a migrant destination, the Ashanti Region in Ghana are analysed, comprising 15 interviews with MYEs who hail from 12 communities in the three Northern Regions of Ghana. The authors introduce a narrative-based approach, which has previously been under-employed within empirical studies of informal entrepreneurship.
Findings
The findings showcase the complex array of opportunities and challenges, which influence individual decisions to engage in informal entrepreneurship. The findings highlight the importance of not only economic rationales but also non-economic rationales for engaging in informal entrepreneurship. Such rationales emerge from the legitimation of informal practices, the social embeddedness of migrant youth within family and community networks and the precarious nature of informal entrepreneurship.
Originality/value
The fine-grained discussion of the findings contributes explicitly to theory by underscoring the diversity of informal entrepreneurship activities. Theoretically, the article demonstrates the need to look beyond narrow economic explanations for why individuals engage in informal entrepreneurship. Taking a more holistic approach to explaining motivations for engaging in informal entrepreneurship, enables more nuanced understandings of the importance of non-economic rationales for individuals, located in specific contextual settings.
This paper evaluates critically the relationship between starting-up unregistered and firm performance. The widespread belief across all the dominant theories of informal entrepreneurship is that ...unregistered start-ups experience poorer future firm performance than those registered from the outset of their operations. To evaluate this poorer performance thesis, this paper reports World Bank Enterprise Survey (WBES) data on 377 enterprises in Albania collected in 2019. After controlling for other determinants of firm performance, the finding is that formal enterprises that started-up unregistered have significantly higher annual sales growth than enterprises that registered from the outset. To explain this, the argument is that in weak institutional environments, such as Albania, the advantages of operating unregistered at the outset outweigh the benefits of registration. The result is a call to re-theorize firm performance in the informal sector and for policy to shift toward a more facilitating approach that enhances benefits of registration.
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