Do all marginal groups work in the undeclared economy or only some?

What is it about?

This paper tests competing hypotheses on the relationship between marginalization and participation in undeclared work. The ‘marginalization’ thesis views undeclared work as conducted primarily by marginalized populations among which young, unemployed and economically fragile people dominate. A competing ‘reinforcement’ thesis argues that undeclared work is conducted disproportionately by those in declared jobs and thus that the undeclared economy reinforces, rather than reduces, the inequalities produced by the declared economy. To evaluate who engages in undeclared work and to test these competing theses, data is reported from a 2015 survey of 6,021 randomly selected adult respondents in Bosnia and Herzegovina.

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Photo by Dulana Kodithuwakku on Unsplash

Photo by Dulana Kodithuwakku on Unsplash

Why is it important?

Reporting the marginal effects of a Probit regression analysis, the finding is that marginalized groups (the unemployed, younger age groups, those with fewer years in formal education, lower-income households, rural populations and those from poorer regions) are all significantly more likely to participate in undeclared work. The implications for theory and policy are discussed, along with the limitations of the study and future research required.

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