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In the shadow economy: informal economy and the survival strategies of the unemployed in the Romanian transition

Mungiu-Pippidi, Alina and Ionita, Sorin and Mandruta, Denisa
This study describes the overall strategies of the unemployed in the Romanian transitional economy, tests the extent to which the informal labor market represents an alternative and provides an evaluation of the informal economic sector in Romania, as far as the “gray labor” component is involved. The sources of data are diverse: our own survey on the unemployed population in two different regions of Romania, the Romanian Barometer of Opinion; and various cross-country assessments of the informal economic sector. We conclude that working in the gray sector is only, in small measure, a matter of choice, at least in regions like Neamt, where few alternatives exist even for the relatively young, skilled and entrepreneurial people. In Bucharest the job market is tight and unemployment largely voluntary (or even benefit-induced), in Piatra Neamt around 30% is recession-induced and comprises people who are more dynamic and flexible than the business environment. An overall estimate of the hidden GDP due to the economic activity of the unemployed yields the result of 2% in Bucharest and 6-10% in Piatra Neamt. However, at this point we cannot estimate the size of two other important components of the informal economy: the black market (purely criminal activities) and the unreported activities of those agents who do not use unemployed labor. The study concludes with policy recommendations.
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Contributor: Romanian Academic Society - http://www.sar.org.ro
Topic: Economy and Development
Country: Romania
Document Type: Economic Analyses and Commentaries
Year: 2000
Keywords: Informal Economy, Transition, Unemployment
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