Abstract
Usually, studies on the informal economy focus mainly upon those working in the informal economy (supply side). However, many exchanges in the informal economy are initiated by purchasers asking how much a good or service costs if paid cash in hand. Therefore, the aim of this paper is to advance understanding of who make purchases in the informal economy and the reasons of the consumers making these purchases (demand side). Two potential explanations are evaluated. Firstly, consumers are explained as rational economic actors seeking a more convenient deal or profit maximisation (i.e., lower price or better value for money), making purchases from the informal economy due to the lack of availability of the product or service they need on the formal market, or they make such purchases involuntarily, due to the lack of perfect information necessary to make a fully rational economic decision when purchasing. Secondly, the consumers are portrayed as social actors pursuing community help. Using a multilevel mixed-effects logistic regression analysis on a 2019 Eurobarometer interviews in 27 EU member states and the UK reveal how the prevalence of these motives significantly varies across populations and regions. The theoretical and policy implications of the findings are discussed in the concluding section.
Highlights
Until now, most studies on the informal economy have investigated the supply-side of those who work in the informal economy, examining what types of work they undertake [1, 2], the socio-demographic profile of informal workers [3,4,5,6], their motives for working in the informal economy [7, 8] or the drivers of informal economy, including institutional drivers [9], economic drivers [10] and socio-environmental drivers [11, 12]
Even if it might be argued that consumers will not know if the supplier declares the income to the state or not, Explaining consumer motives to purchase in the informal economy and whether they made a purchase in the informal economy, this does not represent an issue here because this paper looks to transactions where the consumer knowingly perceives themselves to be participating in, or deliberately initiating exchanges in the informal economy, as well as transactions where the consumer realised only afterwards
Important to mention is that 16% of those making purchases in the informal economy did so involuntarily, realising that the purchase was from the informal market only afterwards
Summary
Most studies on the informal economy have investigated the supply-side of those who work in the informal economy, examining what types of work they undertake [1, 2], the socio-demographic profile of informal workers [3,4,5,6], their motives for working in the informal economy [7, 8] or the drivers of informal economy, including institutional drivers [9], economic drivers [10] and socio-environmental drivers [11, 12].
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