Tackling the informal economy in Moldova: An assessment of the options

Abstract

This article presents a structured compilation of the major findings of surveys, articles and reports into the realities of the informal economy in Moldova. Comparative lessons are drawn from actions taken to address aspects of the informal economy in other European countries, with particular attention paid to what has been done in the immediate region of south-east Europe. The author looks firstly at the comparative size of the informal economy in Moldova and its major sectoral and occupational characteristics before examining the major drivers of informality. After considering the implications of the informal economy for the state and for workers, the article turns to the measures which Moldova might take in response. These are varied and many incorporate a scale of investment which Moldova - typically a poor country beset by many problems - may find difficult to access, not least in the time of the pandemic. Others, however, are low-cost measures where the primary barrier is likely to be the existence of the political will to tackle the issues that arise, not least at government level.

Effects of regulatory burden and corruption on firm performance: Evidence from Moldova

“…This partially alleviates the measurement issue for us, as we do not include agriculture in our analysis. Regarding informal employment in formal enterprises, Hutsebaut (2022) finds that the most common type of informality is ‘envelope payments’, which refers to firms declaring only part of their employees' salaries to the authorities. Since none of our firm performance measures are calculated using information on wages, they would not be affected by this type of informality.…”

Taking Stock: A Socio-Economic Assessment of Moldova’s Europeanisation in Light of Its EU Membership Prospects

“…Problems associated with Moldova's large informal (grey) economy is also a research concern. Informal economic activities diminish job security, deprive the state of tax revenues, hinder business development in line with European norms and also have significant gendered effects, given that women are more likely than men to work in the grey economy (Hutsebaut, 2021).…”