Aspects of the Informal Economy in a Transforming Country: The Case of Romania

Abstract

The informal economy has played a large part in state socialist countries and has been growing since 1989 in eastern European countries. Based on qualitative interviews and a large-scale survey carried out in Romania in 1996 and 1998, this article identifies four forms of informal household economies. In the context of a long drawn-out transformational recession in Romania, market conditions are rather unfavourable for most branches of the informal economy, which two-thirds of all Romanian households participate in. Success or failure depend largely on household potential and personal skills. A large group of households, which depend primarily on subsistence farming or on occasional manual labour, is trapped in a survival economy. Households that combine formal and informal jobs mostly manage to escape poverty, and the better off can raise their standards of living through informal activities, especially those who are independent and provide qualified services or those who carry out informal activities related to their formal employment in firms. A small group of informal entrepreneurs struggles between the two extremes of successful accumulation and a situation of dependency. Economically, subsistence farming exacerbates the crisis in agriculture, whereas in other branches of the informal economy there are more positive than negative impacts on overall economic development. Copyright Joint Editors and Blackwell Publishers Ltd 2002.

Explaining the Prevalence of Illegitimate Wage Practices in Southern Europe: An Institutional Analysis

“…Until now, this illegitimate wage practice has been mostly studied in Eastern and Central European countries (Neef 2002;Sedlenieks 2003;Karpuskiene 2007;Williams 2007;Woolfson 2007;Ž abko & Rajevska 2007;Meriküll & Staehr 2010). In recent years, however, the prevalence of this illegitimate practice has also started to be studied in South-Eastern Europe (Psychogios & Williams 2010;Williams 2010aWilliams , 2010bWilliams, Fethi & Kedir 2011;.…”

The prevalence of envelope wages in the Baltic Sea region

“…This is the employment arrangement where formal employees receive from their formal employer two wages, an official wage declared to the state for tax and social security purposes and an unofficial 'envelope' wage which is not declared (Hazans, 2005;Karpuskiene 2007;Neef 2002;Sedlenieks 2003;Williams 2007;Williams and Round 2007;Woolfson, 2007;Žabko and Rajevska 2007). Such an arrangement is primarily used by employers to avoid paying their full social insurance and tax liabilities but is also used to avoid redundancy pay in that its withdrawal acts as a useful tool to encourage employees no longer wanted to voluntarily leave (Hazans 2005;).…”

“…Previous studies of envelope wages have tended to be small-scale qualitative studies which have provided in-depth portrayals of this wage practice primarily in Baltic countries such as Latvia (OECD, 2003;Sedlenieks, 2003;Žabko and Rajevska, 2007), Lithuania (Karpuskiene, 2007;Woolfson 2007) and Russia (Williams and Round, 2007) but also in several other East-Central European nations such as Romania (Neef, 2002) and Ukraine Williams, 2007). For instance, the study in Lithuania by Woolfson (2007) is an in-depth case study of one person, albeit a cause celebre, whilst the Latvian study by Sedlenieks (2003) reports 15 face-to-face interviews conducted in Riga.…”

Explaining Cross-National Variations in the Prevalence and Character of Undeclared Employment in the European Union

“…This is where the employee is not in a declared employment relationship. Recently, however, especially in East-Central Europe, it has been recognized that declared employers sometimes pay a declared employee both a declared salary and an additional undeclared ('envelope') wage (Karpuskiene, 2007;Neef, 2002;Sedlenieks, 2003;Williams, 2007Williams, , 2009Williams, , 2010Williams and Padmore, 2013;Woolfson, 2007). In this article therefore, not only wholly undeclared employment but also under-declared employment is considered.…”