IDEAS home Printed from https://ideas.repec.org/h/beo/swcetp/2310.html
   My bibliography  Save this book chapter

What Determines Informal Economy And Informal Employment - The Case Of North Macedonia

In: Shaping Post-COVID World – Challenges for Economic Theory and Policy

Author

Listed:
  • Predrag Trpeski
  • Borce Trenovski
  • Kristijan Kozheski
  • Marijana Cvetanoska Mitev

Abstract

The importance of the informal economy is seen in the fact that more than 60% of world employment operates in some form of informal economy. Additionally, on average, about 35% of GDP in developing countries is generated in the informal sector, while the informal sector in these countries employs about 70% of the workforce. In the case of the Republic of North Macedonia, this proportion ranges from 36% to 24% for the period 2006 - 2021 which confirm the relevance of this research. The aim of the paper is first to estimate the level of informal economy in the country and furthermore to analyze the impact of the main determinants - labor market determinants on the informal production and informal employment in the Republic of North Macedonia. We employ regression analyses for the period 2006-2021 to determine the key factors behind informal economy and informal employment. The following variables are included in the analysis: Labor Freedom, Tax Burden, Business Freedom, Minimum Wage, and Self-Employed workers. The results of the empirical analysis show that the increase in Labor Freedom and Tax Burden has statistically significant impact on informal production growth, while increase in Business Freedom statistically significantly reduces the informal economy. The increase in the proportion of the minimum wage relative to the average wage causes a reduction in informal production. Regarding informal employment, the obtained results show that the growth of Labor Freedom and Business Freedom has statistically significant impact on informal employment. Also, regarding the self-employed, the growth of this category of employment has statistically significant positive impact on the growth of informal employment.

Suggested Citation

  • Predrag Trpeski & Borce Trenovski & Kristijan Kozheski & Marijana Cvetanoska Mitev, 2023. "What Determines Informal Economy And Informal Employment - The Case Of North Macedonia," Shaping Post-COVID World – Challenges for Economic Theory and Policy, in: Aleksandra Praščević & Miomir Jakšić & Mihail Arandarenko & Dejan Trifunović & Milutin Ješić (ed.),Shaping Post-COVID World – Challenges for Economic Theory and Policy, chapter 10, pages 209-237, Faculty of Economics and Business, University of Belgrade.
    • Handle: RePEc:beo:swcetp:2310
    as

    Download full text from publisher

    File URL: http://www.ekof.bg.ac.rs/wp-content/uploads/2023/01/10.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Schneider, Friedrich, 2002. "The Size and Development of the Shadow Economies of 22 Transition and 21 OECD Countries," IZA Discussion Papers 514, Institute of Labor Economics (IZA).
    2. Eric Friedman & Simon Johnson & Daniel Kaufmann & Pablo Zoido-Lobaton, 2007. "Dodging the Grabbing Hand: The Determinants of Unofficial Activity in 69 Countries," Palgrave Macmillan Books, in: Erik Berglöf & Gérard Roland (ed.), The Economics of Transition, chapter 9, pages 298-334, Palgrave Macmillan.
    3. Gabriel Ulyssea, 2018. "Firms, Informality, and Development: Theory and Evidence from Brazil," American Economic Review, American Economic Association, vol. 108(8), pages 2015-2047, August.
    4. Loayza,Norman V., 2018. "Informality : Why Is It So Widespread and How Can It Be Reduced?," Research and Policy Briefs 133110, The World Bank.
    5. Novkovska Blagica & Dumičić Ksenija, 2018. "Energy Consumption as an Indicator of Hidden Economy: Comparative Analysis," Business Systems Research, Sciendo, vol. 9(2), pages 96-107, July.
    6. Friedrich Schneider & Andreas Buehn & Claudio Montenegro, 2010. "New Estimates for the Shadow Economies all over the World," International Economic Journal, Taylor & Francis Journals, vol. 24(4), pages 443-461.
    7. Mr. Ben Kelmanson & Koralai Kirabaeva & Leandro Medina & Borislava Mircheva & Jason Weiss, 2019. "Explaining the Shadow Economy in Europe: Size, Causes and Policy Options," IMF Working Papers 2019/278, International Monetary Fund.
    8. Kaufmann, Daniel & Kaliberda, Aleksander, 1996. "Integrating the unofficial economy into the dynamics of post-socialist economies : a framework of analysis and evidence," Policy Research Working Paper Series 1691, The World Bank.
    9. Truman Packard & Johannes Koettl & Claudio E. Montenegro, 2012. "In From the Shadow : Integrating Europe's Informal Labor," World Bank Publications - Books, The World Bank Group, number 9377, April.
    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. repec:beo:swcetp:23-10 is not listed on IDEAS
    2. Dagmara Nikulin & Ewa Lechman, 2021. "Shadow Economy in Poland: Results of the Survey," SpringerBriefs in Economics, in: Shadow Economy in Poland, chapter 0, pages 49-65, Springer.
    3. Hapsari,Indira Maulani & Shu Yu & Pape,Utz Johann & Mansour,Wael, 2023. "Informality in Indonesia: Levels, Trends, and Features," Policy Research Working Paper Series 10586, The World Bank.
    4. Ceyhun Elgin & M. ayhan Köse & Franziska Ohnsorge & Shu Yu, 2021. "Understanding Informality Abstract:," Working Papers 2021/03, Bogazici University, Department of Economics.
    5. Blagica Petreski & Marjan Petreski, 2022. "Unregistered micro-performers of business activity in North Macedonia: Analysis with recommendations for a policy action," Finance Think Policy Studies 2022-07/43, Finance Think - Economic Research and Policy Institute.
    6. Elgin, Ceyhun & Kose, M. Ayhan & Ohnsorge, Franziska & Yu, Shu, 2021. "Understanding Informality," MPRA Paper 109490, University Library of Munich, Germany.
    7. Emanuele Bracco & Luisanna Onnis, 2022. "Immigration, amnesties, and the shadow economy," Bulletin of Economic Research, Wiley Blackwell, vol. 74(4), pages 1135-1162, October.
    8. Branimir Jovanovic, 2015. "Kalman Filter Estimation of the Unrecorded Economy in Macedonia," Working Papers 2015-02, National Bank of the Republic of North Macedonia.
    9. Owolabi, Adegboyega O. & Berdiev, Aziz N. & Saunoris, James W., 2022. "Is the shadow economy procyclical or countercyclical over the business cycle? International evidence," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 257-270.
    10. Donal Mac Géidigh & Friedrich Schneider & Matthias Blum, 2016. "Grey Matters: Charting the Development of the Shadow Economy," CESifo Working Paper Series 6234, CESifo.
    11. Psychoyios, Dimitrios & Missiou, Olympia & Dergiades, Theologos, 2021. "Energy based estimation of the shadow economy: The role of governance quality," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 797-808.
    12. Luisanna Onnis & Patrizio Tirelli, 2015. "Shadow economy: Does it matter for money velocity?," Empirical Economics, Springer, vol. 49(3), pages 839-858, November.
    13. Saunoris, James W., 2024. "Individualism, economic freedom, and the development of the shadow economy," Economic Systems, Elsevier, vol. 48(1).
    14. Robert G. Blanton & Dursun Peksen, 2021. "A Global Analysis of Financial Crises and the Growth of Informal Economic Activity," Social Science Quarterly, Southwestern Social Science Association, vol. 102(4), pages 1947-1965, July.
    15. Friedrich Schneider & Andreas Buehn & Claudio E. Montenegro, 2011. "Shadow Economies All Over the World: New Estimates for 162 Countries from 1999 to 2007," Chapters, in: Friedrich Schneider (ed.), Handbook on the Shadow Economy, chapter 1, Edward Elgar Publishing.
    16. Schneider, Friedrich, 2014. "The Shadow Economy and Shadow Labor Force: A Survey of Recent Developments," IZA Discussion Papers 8278, Institute of Labor Economics (IZA).
    17. Byung-Yeon Kim, 2011. "The Unofficial Economy in Russia," KIER Working Papers 797, Kyoto University, Institute of Economic Research.
    18. Korhan K. Gokmenoglu & Aysel Amir, 2023. "Investigating the Determinants of the Shadow Economy: The Baltic Region," Eastern European Economics, Taylor & Francis Journals, vol. 61(2), pages 181-198, March.
    19. Gheorghe H. Popescu & Adriana Ana Maria Davidescu & Catalin Huidumac, 2018. "Researching the Main Causes of the Romanian Shadow Economy at the Micro and Macro Levels: Implications for Sustainable Development," Sustainability, MDPI, vol. 10(10), pages 1-37, September.
    20. Elgin, Ceyhun & Uras, Burak R., 2013. "Public debt, sovereign default risk and shadow economy," Journal of Financial Stability, Elsevier, vol. 9(4), pages 628-640.
    21. Ceyhun Elgin & Burak Uras, 2013. "Is informality a barrier to financial development?," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 4(3), pages 309-331, August.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • J17 - Labor and Demographic Economics - - Demographic Economics - - - Value of Life; Foregone Income
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market

    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:beo:swcetp:2310. See general information about how to correct material in RePEc.

    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: Goran Petrić (email available below). General contact details of provider: https://edirc.repec.org/data/efbeoyu.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.