How informal exchange persists under strong institutions: a triadic model of informal governance

Floris Noordhoff

Journal of Institutional Economics, 2026, vol. 22, -

Abstract: How is an off-the-books exchange governed under strong formal regulation? This article answers this question through a mechanism-based reanalysis of 216 interviews conducted in Amsterdam and Rotterdam in 1997–1999, focusing on 46 traceable cases of undeclared or informally compensated activity. Treating the corpus as a historical welfare-state baseline, not evidence of current prevalence, this article shows that informal exchange was governed at the transaction level through three linked mechanisms. Moral norms distinguished necessity-based side activities from abusive undeclared work; trust relations filtered access to low-visibility opportunities; and community-based enforcement stabilised repeated exchange through reputation, reciprocity, monitoring, and selective exclusion. These mechanisms mattered where formal work was blocked, weakly rewarding, administratively risky, or incompatible with care obligations. This article contributes to institutional economics by specifying how informal institutions shape the legitimacy, accessibility, durability, scale, and visibility of exchange under strong formal regulation.

Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:cup:jinsec:v:22:y:2026:i::p:-_31

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