Explaining Participation in the Informal Economy in Post-Socialist Societies:

What is it about?

This paper proposes a new way of explaining the informal economy in post-socialist societies.

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Why is it important?

Drawing upon evidence from 1,000 face-toface interviews conducted in Croatia during 2013, and using stepwise Tobit regression analysis, the finding is that after controlling for other explanatory variables, participation in the informal economy results from the asymmetry between the norms, values and beliefs of citizens (informal institutions) and the codified laws and regulations (formal institutions). Reducing such institutional asymmetry is thus required if the informal economy is to be tackled. How this can be achieved in post-socialist societies is then discussed.

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