Explaining the Undeclared Economy in Bulgaria: An Institutional Asymmetry Perspective

South East European Journal of Economics and Business, Volume 9 (2) December 2014, 33-45

13 Pages Posted: 27 Dec 2015

See all articles by Colin Williams

Colin Williams

University of Sheffield - School of Management

Josip Franic

University of Sheffield - School of Management

Rositsa Dzhekova

University of Sheffield

Date Written: 2014

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.

Keywords: informal sector, shadow economy, tax morale, institutional theory, Bulgaria, South-East Europe

JEL Classification: H26, J46, J48, K34, K42, O17, P2, P3

Suggested Citation

Williams, Colin and Franic, Josip and Dzhekova, Rositsa, Explaining the Undeclared Economy in Bulgaria: An Institutional Asymmetry Perspective (2014). South East European Journal of Economics and Business, Volume 9 (2) December 2014, 33-45, Available at SSRN: https://ssrn.com/abstract=2708444

Colin Williams (Contact Author)

University of Sheffield - School of Management ( email )

15 Conduit Road
Sheffield, S10 1FL
United Kingdom

HOME PAGE: http://https://www.sheffield.ac.uk/management/staff/williams/index

Josip Franic

University of Sheffield - School of Management ( email )

9 Mappin Street
Sheffield, S1 4DT
United Kingdom

Rositsa Dzhekova

University of Sheffield ( email )

17 Mappin Street
Sheffield, Sheffield S1 4DT
United Kingdom

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