INSTITUTIONS & TRANSITION ECONOMICS: UNDERGROUND ECONOMY eJOURNAL

"Undeclared Economic Activities of Croatian Companies: Findings from a Representative Survey of 521 Companies" Free Download

PREDRAG BEJAKOVIĆ, University of Sheffield - School of Management
COLIN C. WILLIAMS, University of Sheffield - School of Management
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This report presents the findings of a survey on undeclared economic practices undertaken by Croatian companies. In order to obtain the rigorous evidence on undeclared work in Croatia, we previously investigated citizens’ experiences with undeclared work and the practice of envelope wages. With this representative survey of 521 companies, we focus on frequency of company engagement in the undeclared economy.

Four out of ten survey respondents estimate that 20% to 50% of trade in their sector is undeclared, while more than one quarter (21.8%) believe that this percentage is higher than 50%. Only one sixth of survey respondents state that the percentage of trade in their sector conducted through the undeclared economy is less than 10%.

40% of respondents believe that 20% to 50% of employees in their sector are working without a contract, while 11.8% estimate that this percentage is greater than 50%. One quarter of the company representatives (26.12%) think that less than 10% of employees in their sector do not have contracts.

More than half of the survey respondents (59.3%) believe that the extent of envelope wages in their sector is between 20% and 50%, while 17% deem that underreporting of salaries is higher than 50%. A little less than one quarter (23.8%) of respondents evaluated that envelope wage practices are not widespread in their industry and that they represent less than 20% of salaries. Administrative and support service and accommodation and food service activities are at the top of the list of sectors that always apply the practice of envelope wages. On the other side, such a practice is never applied in a significant number of companies in arts, entertainment and recreation and in education. Regarding the characteristic years in business, mentioned behaviour is less prevalent in companies with business activity from one to three years and from four to ten years.

Almost a half (47.28%) of survey respondents believe that the proportion of the total wage payments that are paid unofficially is in the 20-50% range of the total wage payments, while around 16% state that this percentage is greater than 50% and another 16% stated that the range is between 10% and 20%. A little over one fifth (21.2%) of respondents evaluate that such undeclared payments represent less than 10% of total wage payments. According to views of the surveyed firm representatives, the most important reason for companies in Croatia underreporting salaries of their employees is the intention to keep labour costs down, followed by longer working hours.

All different types of misbehaviour among the competitors, except illicit exporting/importing of goods, false documentation or no documentation, happens in 50% to 60% of the cases. In addition, 42.64% of the interviewed representatives think that illicit exporting or importing never happens, while 17.16% assessed that this behaviour happens in almost all cases. Regarding the VAT fraud, almost half of the interviewed representatives (49.39%) stated that it happens sometimes, while 28.61% never observed such behaviour. This similar structure of responses was found for hiding, not paying taxes, duties and/or excises - more than a half of the interviewed representatives stated that this happens sometimes, while 23.4% believed that it never happens.

Overall, the survey respondents widely agreed with the majority of measures for tackling undeclared economic activities undertaken by companies, therefore supporting a combination of various policies and measures. The majority of the interviewed representatives (53.73%) supported the notion that companies, which employ undeclared workers, under-report salaries or have outstanding social security payments should be banned from participation in public tenders and should not receive subsidies. Furthermore, 44.05% of companies believe that by simplifying the processes for hiring workers on small or occasional jobs would reduce undeclared work. In contrast, less than 20% of the surveyed participants think that public exposure of undeclared work and/or awareness campaigns about the negative consequences of operating unregistered would result in significant reduction in the undeclared economy.

"The Assessment of Challenges to Competition Enforcement in Egypt: The Informal Economy and Governmental Intervention(s)" 
ElFar Mohamed, The Assessment of Challenges to Competition Enforcement in Egypt: The Informal Economy and Governmental Intervention(s), pp. 401-406, Issue 9, Vol. 38, E.C.L.R, 2017

MOHAMED ELFAR, Queen Mary - University of London
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There are differences between developing and developed countries market structures. This may presuppose differences in enforcement policies and priorities. While giving priority to inter-brand competition, intra-brand competition should not be undermined. The article explores the case of Egypt, as a representative to developing countries, by assessing its enforcement policy of intra-brand competition. The article also recommends a way forward in light of international best practices.

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About this eJournal

This eJournal distributes working and accepted paper abstracts of empirical and theoretical papers on issues related to the underground economy in the context of transitional economies.

Editor: Erik Berglöf, Stockholm School of Economics

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Directors

INSTITUTIONAL & TRANSITION ECONOMICS EJOURNALS

MICHAEL C. JENSEN
SSRN, Harvard Business School, National Bureau of Economic Research (NBER), European Corporate Governance Institute (ECGI), Harvard University - Accounting & Control Unit
Email: mjensen@hbs.edu

Please contact us at the above addresses with your comments, questions or suggestions for ERN-Sub.

Advisory Board

Institutions & Transition Economics: Underground Economy eJournal

PHILIPPE AGHION
Professor, College de France and London School of Economics and Political Science, Fellow, Fellow, Centre for Economic Policy Research (CEPR), National Bureau of Economic Research (NBER)

MASAHIKO AOKI
Professor Emeritus, Senior Fellow, Stanford University

KENNETH J. ARROW
Joan Kenney Professor of Economics, Stanford University - Department of Economics

OLIVIER J. BLANCHARD
National Bureau of Economic Research (NBER), Peter G. Peterson Institute for International Economics

IRENA GROSFELD
Professor, Paris School of Economics

JANOS KORNAI
Corvinus University of Budapest

GUR OFER
Hebrew University of Jerusalem - Department of Economics

RICHARD PORTES
Professor of Economics, London Business School - Department of Economics, Fellow, Centre for Economic Policy Research (CEPR), National Bureau of Economic Research (NBER)

YINGYI QIAN
Dean, Tsinghua University - School of Economics & Management, Fellow, Centre for Economic Policy Research (CEPR)

GÉRARD ROLAND
Professor of Economics and Political Science, University of California, Berkeley - Department of Economics, Fellow, Centre for Economic Policy Research (CEPR)

JEFFREY D. SACHS
Professor and Director, Columbia University - Columbia Earth Institute, National Bureau of Economic Research (NBER)

ANDREI SHLEIFER
Professor of Economics, Harvard University - Department of Economics, Fellow, National Bureau of Economic Research (NBER), Fellow, European Corporate Governance Institute (ECGI)

HANS-WERNER SINN
CEO, CESifo (Center for Economic Studies and Ifo Institute), Fellow, National Bureau of Economic Research (NBER), Director, Center for Economic Studies, Professor, Ludwig Maximilian University of Munich

JAN SVEJNAR
School of International and Public Affairs, Columbia University, NY, USA, CEPR, IZA, CERGE-EI, University of Ljubljana