scholarly journals Explaining the Undeclared Economy in Bulgaria: an Institutional Asymmetry Perspective

2015 ◽  
Vol 9 (2) ◽  
pp. 33-45 ◽  
Author(s):  
Colin C. Williams ◽  
Josip Franic ◽  
Rositsa Dzhekova
Keyword(s):  
Social Contract ◽  
Informal Institutions ◽  
Formal Institutions ◽  
East Europe ◽  
Face To Face ◽  
South East Europe ◽  
The Social ◽  
Formal And Informal Institutions ◽  
Values And Beliefs ◽  
Civic Morality

Abstract This paper proposes a way of explaining the undeclared economy that represents participation in undeclared work as a violation of the social contract between the state and its citizens, and as arising when the informal institutions comprising the norms, values and beliefs of citizens (civic morality) do not align with the codified laws and regulations of a society’s formal institutions (state morality). Drawing upon evidence from 1,018 face-to-face interviews conducted in Bulgaria during 2013, the finding is that the greater is the asymmetry between formal and informal institutions (i.e., citizens’ civic morality and state morality), the greater is the likelihood of participation in the undeclared economy, and vice versa. The outcome is that tackling the undeclared economy requires a focus upon reducing this lack of alignment of formal and informal institutions. How this can be achieved in Bulgaria in particular and South-East Europe and beyond more generally, is then discussed.

scholarly journals Experiences, causes and measures to tackle institutional incongruence and informal economic activity in South-East Europe

2018 ◽  
Vol 68 (7) ◽  
pp. 950-971
Author(s):  
David Littlewood ◽  
Peter Rogers ◽  
Colin Williams
Keyword(s):  
Focus Groups ◽  
Economic Activity ◽  
Informal Institutions ◽  
Formal Institutions ◽  
East Europe ◽  
Republic Of Macedonia ◽  
South East Europe ◽  
Values And Beliefs ◽  
Qualitative Focus Groups ◽  
Yugoslav Republic

To explain the prevalence and persistence of informal economic activity globally, scholars have recently advanced an institutional incongruence perspective. Institutional incongruence exists where there is a misalignment between what is considered legitimate by a society’s formal institutions (e.g. its laws and regulations) and its informal institutions (e.g. norms, values and beliefs). Reporting findings from a series of qualitative focus groups in Bulgaria, Croatia and the Former Yugoslav Republic of Macedonia, this article explores relationships between such institutional incongruence and informal economic activity. In particular, it sheds light on how informality and institutional incongruence are experienced by individuals in South-East Europe. It furthermore provides insights on the causes of such incongruence, and how it can lead to informal economic activity. Finally, it reports on individuals’ perceptions towards different measures to tackle institutional incongruence and informal economic activity, with implications for policymakers in South-East Europe and more widely.

Cross-country variations in the participation of small businesses in the informal economy

2016 ◽  
Vol 23 (1) ◽  
pp. 3-24 ◽  
Author(s):  
Colin C Williams ◽  
Ioana Alexandra Horodnic
Keyword(s):  
Informal Economy ◽  
Small Businesses ◽  
Informal Institutions ◽  
The European Union ◽  
Formal Institutions ◽  
Content Type ◽  
Face To Face ◽  
Cross Country ◽  
Laws And Regulations ◽  
Civic Morality

Purpose – The purpose of this paper is to advance a new explanation for cross-country variations in the participation of small businesses in the informal economy. Drawing upon institutional theory, it proposes that the greater the asymmetry between the codified laws and regulations of formal institutions (state morality) and the unwritten socially shared rules of informal institutions (civic morality), the greater is the propensity of small businesses to participate in the informal economy. To analyse this, the extent to which small businesses evade payroll taxes by paying employees an undeclared (envelope) wage in addition to their official declared salary is analysed. Design/methodology/approach – To evaluate this, data are reported from a 2013 Eurobarometer survey involving 5,174 face-to-face interviews with employees in small businesses across the 28 member states of the European Union (EU-28). Findings – The finding is that small businesses display a greater propensity to engage in this informal wage practice in countries where there is a higher degree of asymmetry between the codified laws and regulations of formal institutions (state morality) and the unwritten socially shared rules of informal institutions (civic morality). A multi-level logistic regression analysis reveals these to be countries which have lower qualities of governance, lower levels of taxation and intervention in the labour market and less effective social transfer systems. Research limitations/implications – The major limitation of this study is that it has only examined whether employees in small businesses receive informal wages. Future cross-country surveys should analyse a wider range of ways in which small businesses participate in the informal economy such as under-reporting turnover. Originality/value – This is the first known analysis of cross-country variations in the participation of small businesses in the informal economy.

scholarly journals Formal institutions and the development of entrepreneurial activity – the contingent role of corruption in emerging economies

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Arezou Harraf ◽  
Hasan Ghura ◽  
Allam Hamdan ◽  
Xiaoqing Li
Keyword(s):  
Emerging Economies ◽  
Corporate Entrepreneurship ◽  
Informal Institutions ◽  
Entrepreneurial Activity ◽  
Future Research ◽  
Formal Institutions ◽  
Business World ◽  
Content Type ◽  
Formal And Informal Institutions ◽  
Control Of Corruption

PurposeThe paper aims to analyse the interplay between formal and informal institutions' and their impact on entrepreneurship rates in emerging economies.Design/methodology/approachThis study expands previous research in examining the moderating effect of control of corruption on the relationship between formal institutions and the development of the entrepreneurial activity. The study utilizes longitudinal analyses of a dataset from 41 emerging economies over 11 years (2006–2016).FindingsFindings provided robust support for the study's hypotheses. The results suggested lower levels of corruption positively moderate the effects of a country's number of procedures and education and training on the rates of entrepreneurial activity, while negatively moderating the effects of firm-level technology absorption on the rates of entrepreneurial activity.Research limitations/implicationsThe study has considered only one particular aspect of high-growth entrepreneurship, which is newly registered firms with limited liability. Although newly registered firms are recognized as one of the critical drivers of entrepreneurial activity. Future research should seek to examine other aspects of growth-oriented entrepreneurship such as activities involving a high level of innovation, corporate entrepreneurship or technology developments.Practical implicationsThis study advanced the existing theories in the field of entrepreneurship and institutional economics as it merged the two theories as a driving framework in the design of the study in the context of emerging economies.Social implicationsThe study tested a theoretical model by expanding the number of emerging economies in the study and found comparable findings that explain factors that may influence the likelihood of individuals entering entrepreneurship.Originality/valueThis article adds to the current literature as it highlights the importance of the interplay of formal and informal institutions in determining their impact on entrepreneurship rates in emerging economies. This is of particular importance to policy-makers, and the business world as the empirical results of this study show the benefits of control of corruption in boosting entrepreneurial rates in these economies, which strive for economic diversification in their developmental endeavours.

scholarly journals An Institutional Theory of Tax Non- Compliance in Bulgaria: a Tax Morale Approach

2020 ◽  
pp. 33-49 ◽  
Keyword(s):  
Institutional Theory ◽  
Firm Size ◽  
Representative Sample ◽  
Political Instability ◽  
Informal Institutions ◽  
Formal Institutions ◽  
Tax Morale ◽  
Economic Decision ◽  
Face To Face ◽  
Nationally Representative

To explain tax non-compliance, the dominant approach has been to view noncompliance as a rational economic decision taken when the benefits outweigh the costs. However, many remain compliant even when non-compliance is the rational economic decision. The outcome has been the emergence of a new tax morale approach. Grounded in institutional theory, this asserts that formal institutional failings lead to an asymmetry between the laws and regulations of a society’s formal institutions and the beliefs of the population that constitute its informal institutions. The greater is this asymmetry (measured by the level of tax morale), the greater is the prevalence of tax non-compliance. Until now, studies have analysed the tax morale of citizens. This paper evaluates the tax morale of entrepreneurs and identifies the formal institutional failings that lead to lower tax morale among entrepreneurs. Reporting 456 face-to-face interviews with a nationally representative sample of entrepreneurs in Bulgaria, it is revealed not only that the tax morale of entrepreneurs varies by sector and firm size, but also that the formal institutional failings significantly associated with low tax morale include a perceived lack of tax fairness, corruption and political instability. The implications for theory and policy are then discussed.

scholarly journals The Impact of Institutions on the Evolution of Tourism Accommodation Format: Evidence from Wulingyuan, China

2019 ◽  
Vol 11 (10) ◽  
pp. 2882
Author(s):  
Ting Jiang ◽  
Shaobing Zhuo ◽  
Chaozhi Zhang ◽  
Jun Gao
Keyword(s):  
Sustainable Development ◽  
Informal Institutions ◽  
Evolution Process ◽  
Formal Institutions ◽  
Tourist Destination ◽  
The Sustainable Development ◽  
Formal And Informal Institutions ◽  
Industry Needs ◽  
The Impact ◽  
Current Stage

This paper examines the impact of institutions on evolution of tourism accommodation format in Wulingyuan, a well-known tourist destination in China, from the perspective of institutional cluster embeddedness. Data were primarily collected through interviews and participant observations. The findings show a five-stage evolution process starting from introduction (1982–1988), through growth (1989–2000), adjustment (2001–2004), and upgrade (2005–2010) to the current stage of individualization (2011–present). During the process, the informal institutions work to suppress, conflict with the formal institutions, yet transform into formal institutions in the end. In such a process, institutional loopholes and frictions are the norm, and tourism accommodation format evolves from extensive development to sustainable development. It suggests that the sustainable development of the tourism accommodation industry needs the synergy of formal and informal institutions.

State-socialist Transformations in the Twentieth Century

2019 ◽  
pp. 258-269
Author(s):  
Dieter Segert
Keyword(s):  
State Socialism ◽  
East Europe ◽  
Labour Movement ◽  
Classical State ◽  
South East Europe ◽  
The Social ◽  
New Type ◽  
Informal Practices ◽  
Second Wave ◽  
State Socialist

This chapter examines European state socialism, which emerged in the Russian Revolution of 1917. It has two roots, the social democratic labour movement and specific problems of underdeveloped, peripheral capitalist societies. While generally relying on Marx, the Bolsheviks invented the doctrine of the ‘new type of party’. After the conquest and stabilization of power, they built in Russia the institutions of classical state socialism and led the country on a specific path of modernization. After 1945, there was a second wave of state-socialist transformation in eight states of East Central and South East Europe. In all countries except Yugoslavia, the formal institutions of the Soviet model were established but the informal practices between countries differed considerably. At the end of the chapter, the blind spots and desiderata of three scholarly interpretations of state socialism are discussed.

scholarly journals Explaining the Prevalence of the Informal Economy in the Baltics: an Institutional Asymmetry Perspective

2015 ◽  
Vol 22 (2) ◽  
pp. 127-145 ◽  
Author(s):  
Colin C. Williams ◽  
Ioana A. Horodnic
Keyword(s):  
Labour Market ◽  
Informal Economy ◽  
State Intervention ◽  
Formal Institutions ◽  
Institutional Perspective ◽  
Baltic Countries ◽  
Poverty And Inequality ◽  
Values And Beliefs ◽  
The Asymmetry ◽  
Civic Morality

Reporting a 2013 Eurobarometer survey of participation in the informal economy across eight Baltic countries, this paper tentatively explains the informal economy from an institutional perspective as associated with the asymmetry between the codified laws and regulations of the formal institutions (state morality) and the norms, values and beliefs of citizens (civic morality). Identifying that this non-alignment of civic morality with the formal rules is more acute when there is greater poverty and inequality, less effective redistribution and lower levels of state intervention in the labour market and welfare, the implications for theorising and tackling the informal economy are then discussed.

Knowledge spillover driven by institutions: evidence from the big science project in China

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Lingling Zhang ◽  
Chang Gao ◽  
Yoshiteru Nakamori
Keyword(s):  
Knowledge Spillovers ◽  
Informal Institutions ◽  
Knowledge Spillover ◽  
Individual Behavior ◽  
Engineering Practice ◽  
Big Science ◽  
Formal Institutions ◽  
Institutional Perspective ◽  
Content Type ◽  
Formal And Informal Institutions

Purpose This study aims to explore the knowledge spillover mechanism in big science projects (BSP) from an institutional perspective by elaborating on the dynamic relationship between institutional dualism and legitimacy. Design/methodology/approach The study conducts an exploratory research and adopts the grounded theory methodology in the context of BSP. Data draw mainly upon nine semi-structured interviews. Findings The knowledge spillovers in BSP are driven by institutions, which work through mechanisms of legitimacy perception. Formal and informal institutions influence organizational and individual behavior through legitimacy pressure and support. Formal institutions impose legitimacy pressure on organizations and individuals, forcing them to cooperate closely to solve problems; informal institutions enable them to adopt innovative strategies and positive attitudes through legitimacy support; all these promote knowledge spillovers in research and development (R&D) activities, engineering practice and regional interaction. Knowledge spillovers enable stakeholders to realize their R&D advancement, manufacturing promotion and management sophistication. Further, regional knowledge diffusion and culture transmission promote regional innovation and social capital accumulation. Research limitations/implications The study develops a theoretical model that shows how knowledge spillover mechanisms happen in BSP from an institutional perspective (the trigger, the channels/process and the impacts). More specifically, this explanation is provided by explaining how formal and informal institutions influence organizational and individual behavior through legitimacy perceptions. Practical implications First, policymakers should recognize and value the guiding, supporting and coordinating role of formal institutions and enrich capital forms to release the legitimacy pressure of stakeholders. Second, management of BSP needs to be capable of coordinating stakeholder relationships and interactions, while management should focus their attention on fostering good organizational routines and shared group value. Third, the local culture and customs should be taken into consideration since it can be an enabling or constraining of BSP. Finally, industries can take advantage of the opportunity to coordinate their R&D efforts to gain competitiveness. Originality/value First, the authors introduce the institutional perspective to analyze the construction process of BSP, which helps to better understand the interactions of stakeholders under the influence of institutions, the dynamic process and impacts of knowledge spillovers. Second, the authors are committed to contributing to the development of knowledge spillover theories by adopting an institutional perspective. The authors furthermore explore and propose the presence of a dynamic mechanism between institutional dualism and knowledge spillovers. In consequence, the authors introduce the concept of legitimacy perceptions, which is a bridge to understanding the interaction between them. Third, by explicitly discussing the actual meaning of our framework, the authors explore the unique potential of institutional arrangement in promoting the knowledge management of complex cross-border cooperation, while seeking to promote its management and administrative practices.

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