Re-theorising participation in undeclared work in the European Union: lessons from a 2019 Eurobarometer survey

Abstract

When explaining participation in undeclared work, the dominant theorisation views undeclared workers as rational economic actors participating in undeclared work when the benefits exceed the expected costs of being caught and punished. An alternative theorisation views participants' in the undeclared economy as social actors driven into undeclared work by their lack of vertical trust (in governments) and horizontal trust (in others). To evaluate these perspectives, this paper reports data from 27,565 interviews conducted for a 2019 Eurobarometer survey on undeclared work in 28 European countries. This reveals that raising the expected costs of being caught and punished has no significant impact on the likelihood of conducting undeclared work. However, greater vertical and horizontal trust have a significant impact on preventing participation in undeclared work, and vertical and horizontal trust also moderate the effectiveness of using penalties and detection to deter engagement in undeclared work. The implication for theory is that a social actor perspective is advocated. The result is a call for a policy shift away from the dominant deterrence approach that increases the penalties and risks of detection, and towards a policy approach focused on improving vertical and horizontal trust.

Working in the shadow: Survey techniques for measuring and explaining undeclared work

“…Current papers that use Eurobarometer data areWilliams & Öz-Yalaman (2021);Horodnic & Williams (2022);Williams & Nadin (2014). For papers using self-collected survey data, seeŽukauskas & Schneider (2016);Putnins & Sauka (2021).7 Feld & Larsen (2012a, p. 86) display the following definition: "The next questions are about what is popularly called 'undeclared work'.…”

Table_1.DOCX

“…Drawing from this theorisation, the following hypothesis is proposed to be tested: H1: The higher the formal-informal institution misalignment the greater the propensity to make informal payments to healthcare practitioners in the public healthcare sector. Surprisingly, despite a large number of studies investigating the informal economy which underline the important role of the social norms (27)(28)(29)(30)(31), this has been under-researched in respect of the informal payments made by patients (24). Social norms represent the trust between the actors in a society (32) and, in this context, amongst the patients and healthcare professionals.…”