Risky Businesses? Young People in Informal Self-Employment in Sofia

Tanya Chavdarova

International Journal of Urban and Regional Research, 2014, vol. 38, issue 6, 2060-2077

Abstract: This article studies how perceptions of the risks associated with informal self-employment depend on the interplay between the institutional, structural (network) and cultural embeddedness of economic action. Informal self-employment should create at least three types of risk. The first concerns the possible legal and social sanctions that stem from the illegal character of the entrepreneurial action. The second is related to the complete lack of social security protection among those for whom informal self-employment is their sole employment. The third is connected with the lack of guarantees concerning contract enforcement, which may increase the probability of opportunistic behaviour by business partners and clients. On the basis of a qualitative study of young, highly educated, informally self-employed workers in Bulgaria's capital Sofia, I argue that these risks are compensated by the specific network and cultural embeddedness of the economic action. This compensation takes the form of various types of insurance against risks. Its core is the replacement of the vacuum of institutional-system trust with interpersonal trust. Thus, the specific constellation of institutional, network and cultural embeddedness is able to solve the problem of opportunism, as well as to create the perception that the informally self-employed are faced with not much greater risks than registered self-employed workers.

Date: 2014
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