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Formal Institutional Failings and Informal Employment: Evidence from the Western Balkans

Colin Williams and Gashi Ardiana ()
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Gashi Ardiana: PhD, Professor, Faculty of Economics, University of Prishtina Street, Agim Ramadani n.n., 10000, Prishtina, Kosovo

South East European Journal of Economics and Business, 2022, vol. 17, issue 2, 83-95

Abstract: Institutional theory has explained informal employment to result from formal institutional failings. The aim of this paper is to identify the formal institutional failings associated with informal employment so that action can be taken by governments. Using the Tobit model for econometric analysis and reporting conditional and unconditional marginal effects of the 2021 Balkans Business Barometer survey conducted in six Western Balkan economies (Albania, Bosnia and Herzegovina, Kosovo, North Macedonia, Montenegro and Serbia), the contribution of this paper is to reveal that the perceived incidence and share of informal employment is significantly associated with businesses perceiving governance, public integrity and corruption as very negative or negative, the perception that the government does not consider business concerns and business dissatisfaction with public services. However, the perceived incidence and share of informal employment is not significantly associated with the views of business on tax rates and tax administration, or the perceived instability and lack of predictability of government. The theoretical and policy implications are then discussed.

Keywords: informal economy; undeclared work; shadow economy; tax evasion; institutional theory; public policy (search for similar items in EconPapers)
JEL-codes: H26 J46 K34 O17 P2 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.2478/jeb-2022-0016

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