Why Do Consumers Purchase Goods and Services in the Informal Economy?
Journal of Business Research, May 2014, Vol. 67, No. 5, pp. 802-806.
5 Pages Posted: 27 Dec 2015
Date Written: 2014
To evaluate critically the dominant discourse that consumers acquiring goods and services in the informal economy are rational economic actors seeking a lower price, the results of a 2007 Eurobarometer survey involving 26,659 face-to-face interviews in 27 European Union member states form the basis for analysis. The finding is that achieving a lower price is the sole motive for just 44% of informal economy purchases, one of several rationales in 28% of transactions, and not a rationale in 28% of acquisitions. Consumers also use the informal economy to circumvent the shortcomings of the formal economy in terms of the availability, speed, and quality of goods and services provision, aswell as for social and redistributive reasons, with multilevel mixed-effects logit regression analysis revealing how the prevalence of these rationales significantly varies across populations. The paper concludes by discussing the theoretical and policy implications of the findings.
Keywords: Consumer behavior, Informal sector, Underground economy, Shadow economy, European Union
JEL Classification: H26, J46, J48, K34, K42, O17, P2, P3
Suggested Citation: Suggested Citation