IDEAS home Printed from https://ideas.repec.org/a/taf/pocoec/v29y2017i3p297-312.html
   My bibliography  Save this article

Explaining participation in the undeclared economy in Central and Eastern Europe: a demand-side approach

Author

Listed:
  • Colin C. Williams
  • Ioana A. Horodnic

Abstract

To explain participation in the undeclared economy, the conventional supply-side approach evaluates the reasons people work in this sphere. This article, for the first time in Central and Eastern Europe, explains the undeclared economy using a demand-side approach which evaluates citizens’ motives for purchasing undeclared goods and services. Here, three potential explanations for purchasing undeclared goods and services, grounded in rational economic actor, social actor and institutional imperfections theoretical perspectives, are evaluated. Reporting data from 11,131 face-to-face interviews conducted in 11 Central and Eastern European countries in 2013, the main finding is that all three explanations are used by consumers, demonstrating the need for a synthesis of these approaches. A multinomial regression analysis identifies the specific groups variously using the undeclared economy to obtain a lower price, for social or redistributive rationales, or due to formal institutional imperfections. The implications for theorising and tackling the undeclared economy are then explored.

Suggested Citation

  • Colin C. Williams & Ioana A. Horodnic, 2017. "Explaining participation in the undeclared economy in Central and Eastern Europe: a demand-side approach," Post-Communist Economies, Taylor & Francis Journals, vol. 29(3), pages 297-312, July.
  • Handle: RePEc:taf:pocoec:v:29:y:2017:i:3:p:297-312
    DOI: 10.1080/14631377.2017.1335453
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/14631377.2017.1335453
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/14631377.2017.1335453?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Richard White & Colin Williams, 2010. "Re-thinking Monetary Exchange: Some Lessons from England," Review of Social Economy, Taylor & Francis Journals, vol. 68(3), pages 317-338.
    2. Maloney, William F., 2004. "Informality Revisited," World Development, Elsevier, vol. 32(7), pages 1159-1178, July.
    3. Gary Solon & Steven J. Haider & Jeffrey M. Wooldridge, 2015. "What Are We Weighting For?," Journal of Human Resources, University of Wisconsin Press, vol. 50(2), pages 301-316.
    4. Colin C. Williams & Alvaro Martinez–Perez & Abbi M. Kedir, 2017. "Informal Entrepreneurship in Developing Economies: The Impacts of Starting up Unregistered on firm Performance," Entrepreneurship Theory and Practice, , vol. 41(5), pages 773-799, September.
    5. Williams Colin C. & Horodnic Ioana A., 2015. "Explaining The Prevalence Of The Informal Economy In The Baltics: An Institutional Asymmetry Perspective," European Spatial Research and Policy, Sciendo, vol. 22(2), pages 127-145, December.
    6. Colin C. Williams, 2006. "How much for cash? Tackling the cash-in-hand ethos in the household services sector," The Service Industries Journal, Taylor & Francis Journals, vol. 26(5), pages 479-492, July.
    7. Putniņš, Tālis J. & Sauka, Arnis, 2015. "Measuring the shadow economy using company managers," Journal of Comparative Economics, Elsevier, vol. 43(2), pages 471-490.
    8. Theresa Aldridge & Jane Tooke & Roger Lee & Andrew Leyshon & Nigel Thrift & Colin Williams, 2001. "Recasting Work: The Example of Local Exchange Trading Schemes," Work, Employment & Society, British Sociological Association, vol. 15(3), pages 565-579, September.
    9. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
    10. Anna Lukiyanova, 2015. "Earnings inequality and informal employment in Russia," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 23(2), pages 469-516, April.
    11. Merike Kukk & Karsten Staehr, 2014. "Income underreporting by households with business income: evidence from Estonia," Post-Communist Economies, Taylor & Francis Journals, vol. 26(2), pages 257-276, June.
    12. Arthur T. Denzau & Douglass C. North, 1994. "Shared Mental Models: Ideologies and Institutions," Kyklos, Wiley Blackwell, vol. 47(1), pages 3-31, February.
    13. Colin C. Williams & Abbi M. Kedir, 2017. "Starting-up unregistered and firm performance in Turkey," International Entrepreneurship and Management Journal, Springer, vol. 13(3), pages 797-817, September.
    14. Antonetti, Paolo & Anesa, Mattia, 2017. "Consumer reactions to corporate tax strategies: The role of political ideology," Journal of Business Research, Elsevier, vol. 74(C), pages 1-10.
    15. Williams, Colin C. & Shahid, Muhammad S. & Martínez, Alvaro, 2016. "Determinants of the Level of Informality of Informal Micro-Enterprises: Some Evidence from the City of Lahore, Pakistan," World Development, Elsevier, vol. 84(C), pages 312-325.
    16. Lago-Peñas, Ignacio & Lago-Peñas, Santiago, 2010. "The determinants of tax morale in comparative perspective: Evidence from European countries," European Journal of Political Economy, Elsevier, vol. 26(4), pages 441-453, December.
    17. Williams, Colin C. & Martinez-Perez, Alvaro, 2014. "Why do consumers purchase goods and services in the informal economy?," Journal of Business Research, Elsevier, vol. 67(5), pages 802-806.
    18. Colin C. Williams & Ioana Horodnic, 2015. "Marginalisation and participation in the informal economy in Central and Eastern European nations," Post-Communist Economies, Taylor & Francis Journals, vol. 27(2), pages 153-169, June.
    19. Christian Daude & Hamlet Gutierrez & Ángel Melguizo, 2013. "What Drives Tax Morale? A Focus on Emerging Economies," Hacienda Pública Española / Review of Public Economics, IEF, vol. 207(4), pages 9-40, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Colin C. Williams & Abbi M. Kedir, 2019. "Explaining cross-country variations in the prevalence of informal sector competitors: lessons from the World Bank Enterprise Survey," International Entrepreneurship and Management Journal, Springer, vol. 15(3), pages 677-696, September.
    2. Colin C Williams & Ioana Alexandra Horodnic, 2016. "An institutional theory of the informal economy: some lessons from the United Kingdom," International Journal of Social Economics, Emerald Group Publishing, vol. 43(7), pages 722-738, July.
    3. Ioana Alexandra Horodnic & Colin C. Williams, 2016. "An evaluation of the shadow economy in Baltic states: a tax morale perspective," International Journal of Entrepreneurship and Small Business, Inderscience Enterprises Ltd, vol. 28(2/3), pages 339-358.
    4. Colin C. Williams & Ioana A. Horodnic, 2015. "Explaining and tackling the shadow economy in Estonia, Latvia and Lithuania: a tax morale approach," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 15(2), pages 81-98.
    5. Williams Colin C. & Horodnic Ioana A., 2015. "Explaining The Prevalence Of The Informal Economy In The Baltics: An Institutional Asymmetry Perspective," European Spatial Research and Policy, Sciendo, vol. 22(2), pages 127-145, December.
    6. Colin C Williams & Slavko Bezeredi, 2017. "Explaining Consumers’ Motives for Purchasing from the Informal Economy: Some Lessons from a Study of Bulgaria, Croatia and FYR of of Macedonia," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 4, pages 515-531, December.
    7. Colin C. Williams & Abbi Kedir, 2018. "Explaining Cross-National Variations In The Prevalence Of Informal Sector Entrepreneurship: Lessons From A Survey Of 142 Countries," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 23(01), pages 1-22, March.
    8. Colin C WILLIAMS & Slavko BEZEREDI, 2018. "Explaining informal entrepreneurship in South-East Europe: a tax morale approach," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 9, pages 47-68, December.
    9. Colin C. Williams, 2014. "Confronting the Shadow Economy," Books, Edward Elgar Publishing, number 15370, September.
    10. Colin C. Williams & Friedrich Schneider, 2016. "Measuring the Global Shadow Economy," Books, Edward Elgar Publishing, number 16551, September.
    11. Colin C. Williams & Abbi M. Kedir, 2017. "Starting-up unregistered and firm performance in Turkey," International Entrepreneurship and Management Journal, Springer, vol. 13(3), pages 797-817, September.
    12. Colin Williams & Brunilda Kosta, 2021. "Why do Consumers Buy from Informal Sector Suppliers in East-Central Europe? A Case Study of Home Repair and Renovation Services," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 1, pages 134-152, March.
    13. Colin C Williams, 2021. "Tackling Undeclared Self-Employment in South-East Europe: from Deterrents to Preventative Policy Measures," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 2, pages 280-298, July.
    14. Colin C. Williams & Alvaro Martinez–Perez & Abbi M. Kedir, 2017. "Informal Entrepreneurship in Developing Economies: The Impacts of Starting up Unregistered on firm Performance," Entrepreneurship Theory and Practice, , vol. 41(5), pages 773-799, September.
    15. Colin C. Williams & Ioana A. Horodnic, 2017. "Evaluating the Illegal Employer Practice of Under-Reporting Employees’ Salaries," British Journal of Industrial Relations, London School of Economics, vol. 55(1), pages 83-111, March.
    16. Colin C Williams & Ioana A Horodnic, 2016. "Tackling the undeclared economy in the European Union: an evaluation of the tax morale approach," Industrial Relations Journal, Wiley Blackwell, vol. 47(4), pages 322-340, July.
    17. C. Williams, Colin & Kayaoglu, Aysegul, 2016. "Tackling The Informal Economy In The European Union: A Social Actor Approach," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 7(2), pages 133-147.
    18. Dzemydaitė Giedrė & Savilionytė Ieva, 2017. "The Spread of the Shadow Economy as a Moral Dilemma?," Ekonomika (Economics), Sciendo, vol. 96(3), pages 44-55, January.
    19. Florencia Verónica Pedroni & Anahí Briozzo & Gabriela Pesce, 2019. "¿Por qué no declarar todo? Determinantes de la subfacturación empresarial en la Argentina," Asociación Argentina de Economía Política: Working Papers 4186, Asociación Argentina de Economía Política.
    20. Williams, Colin C. & Martinez-Perez, Alvaro, 2014. "Why do consumers purchase goods and services in the informal economy?," Journal of Business Research, Elsevier, vol. 67(5), pages 802-806.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:pocoec:v:29:y:2017:i:3:p:297-312. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.tandfonline.com/CPCE20 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/CPCE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.