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Poverty and informal economy participation

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  • Byung-Yeon Kim

Abstract

This paper uses a household survey of the Romanian informal economy to analyse the effects of poverty on informal economy participation. We begin by developing a simple theoretical model, which shows that the participation is driven by low income and the gap between desired and actual income level. We then estimate the determinants of households' participation in the informal economy. Empirical findings are consistent with the theoretical prediction. In addition, a positive association between husbands and wives working in the informal economy implies the deep poverty faced by a family whose head participates in the informal economy. Copyright (c) The European Bank for Reconstruction and Development, 2005.

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Bibliographic Info

Article provided by The European Bank for Reconstruction and Development in its journal The Economics of Transition.

Volume (Year): 13 (2005)
Issue (Month): 1 (01)
Pages: 163-185

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Handle: RePEc:bla:etrans:v:13:y:2005:i:1:p:163-185

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Cited by:
  1. Webb, Justin W. & Bruton, Garry D. & Tihanyi, Laszlo & Ireland, R. Duane, 2013. "Research on entrepreneurship in the informal economy: Framing a research agenda," Journal of Business Venturing, Elsevier, vol. 28(5), pages 598-614.
  2. Sandra Sookram & Friedrich G. Schneider & Patrick Kent Watson, 2006. "Characteristics of the household sector of the hidden economy in an emerging economy," Economics working papers 2006-05, Department of Economics, Johannes Kepler University Linz, Austria.

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