Patterns of Participation in the Formal and Informal Economies in the Commonwealth of Independent States

Abstract

The article investigates whether patterns of participation in the informal economy in the Commonwealth of Independent States (CIS) is similar to that identified previously in a study of Central and Eastern Europe through analysis of a survey carried out in 2001 in eight CIS countries: Belarus, Ukraine, Moldova, Russia, Kazakhstan, Kyrgyzstan, Armenia, and Georgia. We find that, as in the previous study, countries where economic development is higher show fewer households dependent upon the informal economy, while countries where development is slowest show more households dependent on the informal economy. While the domestic economy of household production was most important for the elderly and those in rural areas, the formal economy was most important for maintaining living standards. The cash economy added to the formal economy, on the other hand, was a source of wealth accumulation. Furthermore, the degree of urban and rural differentiation also helped to determine the extent to which households turned more toward informal or formal economies, which has implications for the trajectories of development in the different countries under consideration.