2011
DOI: 10.1093/esr/jcr087
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The Effect of Education on Informal Sector Participation in a Post-Communist Country

Abstract: This article examines participation in the informal economy in Albania, a post-communist country in transition. In particular, it focuses on the effect of education while considering other individual, social, and institutional factors. Two factors that can be central in the educational effect on informal sector participation are considered. The human capital factor, referring to the income-related returns of education, may lead to less participation due to lower financial incentives to do so. The other factor,… Show more

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Cited by 42 publications
(23 citation statements)
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“…Many individual-level characteristics normally associated with marginalisation in the formal labour market are found to be significantly associated with participation in unregistered employment. Women, youth and employees with fewer years in education are more significantly more likely to be engaged in unregistered employment, reinforcing the finding by Gerxhani and van de Werfhorst (2013) in Albania on the issue of education. This negative association between education level and unregistered employment can be explained in two ways.…”
Section: Discussionsupporting
confidence: 68%
“…Many individual-level characteristics normally associated with marginalisation in the formal labour market are found to be significantly associated with participation in unregistered employment. Women, youth and employees with fewer years in education are more significantly more likely to be engaged in unregistered employment, reinforcing the finding by Gerxhani and van de Werfhorst (2013) in Albania on the issue of education. This negative association between education level and unregistered employment can be explained in two ways.…”
Section: Discussionsupporting
confidence: 68%
“…More prosperous countries are likely to have better institutions that discourage shadow operations. We also account for the level of education because more investment in human capital raises the opportunity costs of producing in the shadow economy (Berdiev, Pasquesi‐Hill, & Saunoris, ; Buehn & Farzanegan, ; Gërxhani & van de Werfhorst, ; Loayza et al., ).…”
Section: Data and Empirical Methodologymentioning
confidence: 99%
“…Of course, an income effect suggests that demand from the growing official sector could boost the demand in the shadow sector. In addition, countries with large investment in human capital, specifically in tertiary education ( Education ), raises the return in the official sector and thus minimizes the gains to be made underground (Loayza, Servén, and Sugawara ; Buehn and Farzanegan ; Gërxhani and van de Werfhorst ; Berdiev, Pasquesi‐Hill, and Saunoris ). Finally, strength and quality of bureaucracy ( Bureaucratic Quality ) also reduces incentive to move production underground by, for example, reducing exploitation of public officials.…”
Section: Data and Empirical Modelmentioning
confidence: 99%