Driving forces of informal employment: An empirical study based on Polish enterprise data

Abstract

Objective: The article aims to indicate the determinants of informal employment in registered enterprises using company-level evidence from Poland.

Research Design & Methods: The survey conducted among Polish small and medium-sized (SME) enterprises in 2018 was used to find the driving forces of informal employment in Poland. The adequate sample comprised 952 representative surveys derived from the computer-assisted telephone interview (CATI). The quantitative analysis was based on the logistic regression.

Findings: The findings indicate that among the main drivers of informal employment, one can distinguish the level of tax morality of owners or company managers and the administrative difficulties related to setting up a business. The role of non-economic factors in creating informal activities was confirmed. Moreover, informal employment was more prevalent in smaller companies operating in the construction industry.

Implications & Recommendations: Our analysis may be helpful for both research in entrepreneurship and tax evasion and the shadow economy stream. It indicates the heterogeneity among Polish enterprises related to the involvement in informal activities, particularly informal labour. Our study sheds light onto the less known dimension of ‘grey activities’ existing in the registered companies, which is less frequently analysed in the literature.

Contribution & Value Added: This evidence will help us understand the primary motives for using the informal workforce and enhance further research on the nature and extent of informal employment and the shadow economy in general.

Keywords

informal employment; shadow economy; company level data; Poland

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