What is it about?

Participation in undeclared work (UDW) is widespread in Bulgaria. Some 23% of adult Bulgarians have knowingly purchased from the undeclared economy . Nearly 1 in 10 of the adults have worked in the undeclared economy , while almost 1 in 7 of the employed have received envelope wages, with the mean amount underreported at 30% of their net income A third of the population has declared to use personal relations to circumvent formal rules . This points out to a serious economic, social and rule of law problem. Trust among citizens and towards the authorities is low, providing an excellent breeding ground for corruption and crime. Bulgarian authorities need to embark on a comprehensive agenda of understanding and tackling undeclared work. Given the complex character of undeclared work in Bulgaria, this policy brief gives policy recommendations, which emphasise curative, preventative and commitment measures in addition to the continuous increase in repressive measures.

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Why is it important?

 Undeclared work is socially accepted and widely practiced in Bulgaria. The undeclared economy is estimated at roughly a third of GDP. Nearly one in ten people do some undeclared work.  Undeclared work is motivated primarily by lack of trust between the people and the authorities. It involves mostly people who voluntarily exit the declared economy but also those that are excluded.  The conventional repressive approach to tackling undeclared work has exhausted its effects in Bulgaria. It should be complemented with more curative, preventative and commitment policies.  Policymakers should consider not just the rational but also the social actor approach which tackles trust issues and the asymmetry between formal and informal rules. Authorities should continue modernising institutions and should increase social spending and public awareness campaigns.

Perspectives

Displays the need to build trust in institutions to tackle undeclared work in Bulgaria

Professor Colin C Williams
University of Sheffield

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This page is a summary of: Tackling Undeclared Work in Bulgaria: Knowledge-Informed Policy Responses, SSRN Electronic Journal, January 2017, Elsevier, DOI: 10.2139/ssrn.3026332.
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