The Informal Economy in East-Central Europe 1991-1998

Abstract: The informal economy was an essential part of the former Communist economies and is now an important part of the transition economies in Central and Eastern Europe. Many claim that it is growing. This paper will consider the relative size and dynamics of the informal economy in different countries during the course of transition, the forms of participation in the informal economy and its role in economic and political developments in the region. In doing so, it draws upon one repeatedsurvey: New Democracies Barometer (NDB) for the years 1991, 1992, 1994, 1996, and 1998. The paper is divided into six parts: Part 1 introduction, Part 2, the informal economy and economic development, Part 4, the structure of participation in informal economies, or who is participating and how, Part 5 Subjective economic well-being and the informal economy, Part 6 the impact of the informal economy on trust in political and social institutions and upon perceptions of corruption, then in Part 7 we end with a multivariate model which looks at all these factors and participation in the informal economy. The paper covers the following countries: Poland, Czech Republic, Hungary, Slovakia, Slovenia, Croatia, FRY, Romania, Bulgaria, Belarus, and Ukraine. For most of these countries, we have repeated cross-sectional data between 1991 and 1998 (see Methodological Appendix 1).