Management, Marketing and Business Administration

In social economic researches we often need to measure non-observable, latent variables. For this we use special research
instruments, with uni and multi dimensional scales designed for measuring the constructs of interest. Validity and reliability of
these scales are crucial and special tests have been developed in this respect. Reliability concerns often arise, due to external
factors that can influence the power and significance of such tests. Even for standardized instruments variations are possible, and
they could seriously affect research results. The purpose of the present study is to investigate if and how external factors could
influence a largely used reliability estimator - Cronbach Alpha. Several scales commonly used in marketing researches were
tested, using a bootstrapping technique. Results show that important differences in the values of Cronbach Alpha are possible due
to indirect influence from external factors - respondents’ age, gender, level of study, religiousness, rural/urban living, survey type and relevance of the research subject for the participants to the survey.

This article discusses four standardization and adaptation strategies. Two strategies foster adaptation: one by
submission, and the other by indifference. The other two strategies foster standardization: one by superiority
and the other by disputable standardization. The study focuses on small and medium-sized enterprises (SMEs)
because SME internationalization is the current trend in international business research. Interviews with
entrepreneurs gather information on how entrepreneurs balance adaptation and standardization. The
study shows that three main factors influence adaptation and standardization strategies: business activity,
international business experience, and personal values. Results reveal a new dimension, namely customers
relations, which scholars should consider in future research on adaptation and standardization.

To explain the shadow economy in the Baltic states of Estonia, Lithuania and Latvia, this paper evaluates the relationship between the shadow economy and tax morale. Viewing tax morale as a measure of the symmetry between the codified laws and regulations of formal institutions (state morality) and the unwritten socially shared rules of informal institutions (civic
morality), the proposition is that the lower the tax morale (i.e. the greater the asymmetry between state morality and civic morality), the greater is the likelihood to participate in the
shadow economy. To evaluate this, a 2013 survey is reported involving 3036 face-to-face interviews in these 3 Baltic nations. Using logistic regression analysis, the finding is that the likelihood of participating in the shadow economy is greater, the lower is the tax morality of individuals, population groups and countries. In addition, the likelihood to participate in the
shadow economy is found to significantly vary by, for example, gender, employment status and country, people living in Latvia and Lithuania displaying significantly lower likelihood to engage in the shadow economy. The paper then explores the  implications for theorizing and tackling the shadow economy.

When tackling the undeclared economy, an emergent literature has called for the conventional rational economic actor approach (which uses deterrents to ensure that the costs of undeclared work outweigh the benefits) to be replaced or complemented by a social actor approach which focuses upon improving tax morale. Evaluating the validity of doing so using 27,563 face-to-face interviews conducted in 2013 across Europe, multilevel logistic regression analysis reveals that both approaches significantly reduce participation in undeclared work. When tax morale is high, however, deterrence measures have little impact on reducing the probability of participation in undeclared work and it is only when tax morale is low that raising the level of deterrents has greater impacts, with increasing the perceived risks of detection in such contexts leading to higher reductions in participation in undeclared work than increasing the perceived punishments. The paper concludes by calling for more nuanced context-bound policy approaches.

To evaluate the ‘marginalization thesis’ which asserts that marginalized
populations are more likely to participate in undeclared work, we
analyse a 2013 Eurobarometer survey of eight Baltic Sea countries,
namely four Western countries (Denmark, Finland, Germany and
Sweden) and four post-Soviet countries (Estonia, Latvia, Lithuania
and Poland). Finding that across both the Western and post-Soviet
Baltic Sea countries, some marginalized populations (e.g. those
having difficulties paying household bills, younger people) are
significantly more likely to participate in undeclared work, and others
are not (e.g. women, those with a high level of tax morality), a more
nuanced and variegated understanding of the marginalization thesis
is developed that is valid across both Western and post-Soviet Baltic
Sea countries. The paper concludes by discussing the theoretical and
policy implications.

Purpose – Grounded in an emergent recognition that those people in formal employment conduct the vast majority of work in the shadow economy, the purpose of this paper is to evaluate for the first time the degree to which shadow work is conducted by those in formal jobs and the characteristics of those in formal employment who participate in the shadow economy.
Design/methodology/approach – To do this, the authors report a 2007 survey of participation in the shadow economy involving 26,659 face-to-face interviews conducted in 27 European Union (EU) member states.
Findings – The finding is that in the EU, the formally employed undertake a disproportionate share of work in the shadow economy. Analysing the characteristics of the employed most likely to work in the shadow economy, however, it is those who benefit least from the formal economy, namely, younger unmarried men and on lower incomes living in rural areas, working in the construction sector and in small firms.
Research limitations/implications – The outcome is a tentative call for recognition that although people in formal employment conduct the vast majority of work in the shadow economy, these are mostly particular vulnerable and weaker groups of the formally employed. Whether similar findings prevail at other spatial scales and in other global regions now needs investigating.
Practical implications – This survey displays the need for policy not to target the unemployed but particular groups of the formally employed.
Originality/value – The first extensive evaluation of the extent to which shadow work is conducted by those in formal jobs and the characteristics of those in formal employment who participate in the
shadow economy.

Purpose – The purpose of this paper is to propose a new way of explaining participation in the informal economy as resulting from the asymmetry between the codified laws and regulations of a society's formal institutions (government morality) and the norms, values and beliefs of the population that constitute its informal institutions (societal morality). The proposition is that the greater the asymmetry between government morality and societal morality, the greater is the propensity to participate in the informal economy. Design/methodology/approach – To evaluate this institutional asymmetry theory, the results are reported of 1,306 face-to-face interviews conducted during 2013 in the UK. Findings – The finding is a strong correlation between the degree of institutional asymmetry (measured by tax morale) and participation in the informal economy. The lower the tax morale, the greater is the propensity to participate in the informal economy. Using ordered logistic regression analysis, tax morale is not found to significantly vary by, for example, social class, employment status or wealth, but there are significant gender, age and spatial variations with men, younger age groups, rural areas and Scotland displaying significantly lower tax morale than women, older people, urban areas and London. Practical implications – Rather than continue with the current disincentives policy approach, a new policy approach that reduces the asymmetry between government morality and societal morality is advocated. This requires not only changes in societal morality regarding the acceptability of participating in the informal economy but also changes in how formal institutions operate in order for this to be achieved. Originality/value – This paper provides a new way of explaining participation in the informal economy and reviews its consequences for understanding and tackling the informal economy in the UK.

Drawing inspiration from institutional theory, a small sub-stream of literature has proposed that participation in the informal economy arises from the lack of alignment of a society's formal institutions (i.e. its codified laws and regulations) with its informal institutions (i.e. the norms, values and beliefs of its population). To further advance this explanation, this article reports a 2013 Eurobarometer survey involving 27,563 face-to-face interviews across 28 European countries. The finding is that there is a strong association between the degree to which formal and informal institutions are unaligned and participation in the informal economy. The greater is the asymmetry between the formal and informal institutions, the more likely is participation in the informal economy at the individual-, population group-and country-level. A new policy approach for tackling the informal economy which focuses upon reducing this institutional incongruence is then discussed.

To evaluate a new approach towards tackling the undeclared economy, which views participants as social actors rather than rational economic actors, this article reports evidence from 27,563 face-to-face interviews conducted across the European Union during 2013. Multilevel logistic regression analysis reveals a strong association between participation in undeclared work and the level of tax morale. Finding that higher tax morale (and thus a lower propensity to engage in undeclared work) is strongly correlated with greater levels of state intervention but also with individual-level characteristics such as gender, age, education and employment status, the article concludes not only by confirming a political economy approach and refuting modernization and neo-liberal explanations and remedies, but also by revealing for the first time the importance of solutions not so far considered, including improving educational attainment, older citizens mentoring for younger people and improving women's participation in the labour force.

To explain the shadow economy in the Baltic states of Estonia, Lithuania and Latvia, this paper
evaluates the relationship between the shadow economy and tax morale. Viewing tax morale as
a measure of the symmetry between the codified laws and regulations of formal institutions
(state morality) and the unwritten socially shared rules of informal institutions (civic
morality), the proposition is that the lower the tax morale (i.e. the greater the asymmetry
between state morality and civic morality), the greater is the likelihood to participate in the
shadow economy. To evaluate this, a 2013 survey is reported involving 3036 face-to-face
interviews in these 3 Baltic nations. Using logistic regression analysis, the finding is that the
likelihood of participating in the shadow economy is greater, the lower is the tax morality of
individuals, population groups and countries. In addition, the likelihood to participate is
shadow economy is found to significantly vary by, for example, gender, employment status
and country, people living in Latvia and Lithuania displaying significantly lower likelihood
to engage in the shadow economy. The paper then explores the implications for theorizing
and tackling the shadow economy.

This article advances understanding of the prevalence and distribution of the illegal employer practice of under-reporting employees' salaries, explains this practice and evaluates policy approaches. Analysing a 2013 Eurobarometer survey of 11,025 employees in 28 European countries, one in 33 employees receive under-reported salaries, mostly in small businesses and vulnerable groups (e.g. unskilled workers, with lower education levels and financial difficulties). Explaining this practice, not as an individual criminal act that increasing the risk of detection can tackle, but as a symptom of systemic problems, which require improvements both in tax morale at the individual level and in the formal institutional environment at the country level to resolve, we then discuss the implications for theory and policy.

To explain the shadow economy in the Baltic states of Estonia, Lithuania and Latvia, this paper evaluates the relationship between the shadow economy and tax morale. Viewing tax morale as a measure of the symmetry between the codified laws and regulations of formal institutions (state morality) and the unwritten socially shared rules of informal institutions (civic morality), the proposition is that the lower the tax morale (i.e., the greater the asymmetry between state morality and civic morality), the greater is the propensity to participate in the shadow economy. To evaluate this, a 2013 survey is reported involving 3,036 face-to-face interviews in these three Baltic nations. Using ordered logistic regression analysis, the finding is that the lower is the tax morale of individuals, population groups and countries, the greater is the propensity to participate in the shadow economy. The paper then explores the implications for theorising and tackling the shadow economy.

This paper evaluates which entrepreneurs participate in the informal sector. Until now, the dominant view has been that entrepreneurs from marginalised groups benefiting least from the formal sector are more likely to do so. To evaluate this marginalisation thesis, we report a 2013 survey of 11 central and east European countries involving 707 face-to-face interviews with entrepreneurs about their participation in the informal sector. Using logistic regression analysis, the finding is that the marginalisation thesis applies when examining characteristics such as the household financial circumstances and age of entrepreneurs engaged in the informal sector. However, when gender variations are analysed, the thesis is negatively confirmed. Meanwhile, no association is found when analysing characteristics such as the educational level, social class and area inhabited. The outcome is a call to move beyond the marginalisation thesis and towards a more nuanced understanding of which entrepreneurs participate in the informal sector.

Purpose – Conventionally, participation in the informal economy has been explained by viewing
citizens as rational economic actors participating when the pay-off is greater than the expected cost of
being caught and punished, and thus tackled by raising the sanctions and risks of detection. Given that
many citizens do not engage even when the benefits outweigh the costs, a new social actor approach
has begun to emerge which explains the informal economy as arising when tax morality is low and
seeks to foster commitment to compliance. The purpose of this paper is to provide an evidence-based
evaluation of these competing policy approaches.
Design/methodology/approach – To do so, the results are reported of 1,306 face-to-face interviews
undertaken during 2013 in the UK.
Findings – The finding is that raising the sanctions and risks of detection has no significant impact on
the likelihood of participation in the informal sector. However, participation in the informal economy is
significantly associated with tax morality. Indeed, the only time that increasing the sanctions and risks
of detection reduces the level of participation in the informal economy is amongst citizens with very
low tax morality.
Practical implications – Rather than continue with the current rational economic actor approach of
increasing the penalties and risks of detection, this case study of the UK reveals that a new policy
approach is required that seeks to improve tax morality by introducing measures to reduce the
acceptability of participating in the informal economy.Whether this is more widely applicable now needs
to be tested, given the dominance throughout the world of this punitive rational economic actor approach.
Originality/value – This paper provides evidence supporting a new social actor approach towards
explaining and tackling participation in the informal economy.

Purpose – The purpose of this paper is to advance a new explanation for cross-country variations in the
participation of small businesses in the informal economy. Drawing upon institutional theory, it proposes
that the greater the asymmetry between the codified laws and regulations of formal institutions (state
morality) and the unwritten socially shared rules of informal institutions (civic morality), the greater is
the propensity of small businesses to participate in the informal economy. To analyse this, the extent to
which small businesses evade payroll taxes by paying employees an undeclared (envelope) wage in
addition to their official declared salary is analysed.
Design/methodology/approach – To evaluate this, data are reported from a 2013 Eurobarometer
survey involving 5,174 face-to-face interviews with employees in small businesses across the 28 member
states of the European Union (EU-28).
Findings – The finding is that small businesses display a greater propensity to engage in this
informal wage practice in countries where there is a higher degree of asymmetry between the codified
laws and regulations of formal institutions (state morality) and the unwritten socially shared rules of
informal institutions (civic morality). A multi-level logistic regression analysis reveals these to be
countries which have lower qualities of governance, lower levels of taxation and intervention in the
labour market and less effective social transfer systems.
Research limitations/implications – The major limitation of this study is that it has only
examined whether employees in small businesses receive informal wages. Future cross-country
surveys should analyse a wider range of ways in which small businesses participate in the informal
economy such as under-reporting turnover.
Originality/value – This is the first known analysis of cross-country variations in the participation of
small businesses in the informal economy.

Informal patient payments are a widespread phenomenon in post-communist countries. In order to identify who is more likely to make informal payments in East-Central Europe, a 2013 survey is used. Reporting data from Special Eurobarometer No. 397 ('Corruption'), the finding is that patients in Hungary, Latvia, Lithuania, Slovakia, Bulgaria and Romania are significantly more likely to make extra informal payments or to give valuable gifts to medical practitioners or to make a hospital donation additional to the official fees. Women are more likely to make informal payments for healthcare services whilst unemployed patients or those never or almost never having difficulties in paying bills are less likely to make informal payments. The implications of the findings are then explored, displaying the population groups and spaces that need targeting when seeking to tackle informal patient payments.

This paper evaluates the perceived impacts of the informal economy on registered business in the " hotels and restaurants " sector and identifies the characteristics of firms that perceive informal practices as the biggest obstacle faced in their activity. Reporting data from the Business Environment and Enterprise Performance Surveys conducted by the World Bank and the European Bank for Reconstruction and Development in 11 countries in Eastern Europe in 2013, the finding is that registered firms in the " hotels and restaurant " sector perceive informal practices as a bigger obstacle in their activity compared with firms in other sectors. Medium sized companies are less likely to consider the informal sector as the biggest obstacle faced in their activity, whilst a lack of subsidies reduces the likelihood of considering the informal sector as the biggest obstacle for the firm. The implications of the findings are then explored.

Under-declared employment occurs when a formal employer pays a formal employee an official declared wage but also an additional undeclared (‘envelope’) wage in order to evade the full social insurance and tax liabilities owed. The aim of this study is to evaluate the prevalence, characteristics and distribution of this fraudulent wage practice in the EU28, to explain its existence, to provide an evidence-based evaluation of the effectiveness of different policy approaches for tackling it, and propose a set of policy recommendations.

Prevalence, characteristics and distribution of under-declared employment

To evaluate the prevalence, characteristics and distribution of under-declared employment in the EU28, and explain its existence, there are two main datasets. The first is the 2013 special Eurobarometer no. 402 survey of 11,025 employees in the EU28. The second is the employee and employer surveys conducted in late 2015 in Croatia, Bulgaria and FYR Macedonia, funded by the European Commission’s Framework 7 Industry-Academia Partnerships Programme (IAPP) [grant number 611259] entitled ‘Out of the shadows: developing capacities and capabilities for tackling undeclared work’ (GREY).

In the 2013 Eurobarometer survey, one in 33 formal employees in the EU28 received envelope wages in the 12 months prior to the survey. Extrapolating from this, some 6.36 million of the 212 million employees in the EU-28 receive under-reported salaries. All employee groups, types of business and member states are involved in under-declared employment. However, it is relatively more concentrated in some employee groups, business types and member states. Men, younger age groups, those with financial difficulties, skilled manual workers and those travelling for their job, are more likely to receive envelope wages, and under-declared employment is particularly prevalent in smaller firms, and the agricultural, construction, transport, hotel and restaurant, repair services, and retail sectors.

Systemic determinants of under-declared employment

Conventionally, under-declared employment has been seen as an individual criminal act, which is solved by increasing the penalties and risks of detection in order to deter participation. This, however, only deals with the effects. It does not deal with the causes of under-declaring wages. Under-declared employment is a symptom of systemic problems. To identify these, an evaluation of the relationship between cross-national variations in the prevalence of envelope wages and various macro-level economic and social conditions is undertaken. This reveals that the likelihood of under-reporting wages is higher in economies with: lower GDP/capita; unmodernised state bureaucracies with greater public sector corruption; higher levels of severe material deprivation; higher income inequality; lower levels of expenditure on labour market interventions to protect vulnerable groups; and less effective policies of redistribution via social transfers to protect workers from poverty. It is important, therefore, to confront these systemic determinants in order to solve under-declared employment.

Strategies and capacities to tackle under-declared employment

To tackle envelope wages, two contrasting policy approaches are available to governments and social partners. A ‘direct’ approach ensures that the costs outweigh the benefits, mostly by increasing the penalties and risks of detection, which dissuades employers and employees from under-declaring wages. An ‘indirect’ controls approach, meanwhile, asserts that under-declaring wages occurs when the norms, values and beliefs of employees and employers are not in symmetry with the codified laws and regulations. Here, therefore, policy measures seek to align the norms, values and beliefs of employees and employers with the laws and regulations.

Evaluating their effectiveness in reducing under-declared employment, the finding is that although the ‘direct’ approach of increasing the penalties and probability of detection does not influence employees’ tendency to accept envelope wages, increasing the risks of detection does reduce the likelihood of employers paying under-declared wages. The ‘indirect’ approach of improving voluntary compliance, however, reduces the likelihood of employees receiving envelope wages and employers’ under-declaring wages. The outcome is that an indirect approach is recommended as the primary tool for changing the behaviour of employees and employers, and improving the perceived and actual risks of detection is a secondary tool recommended for changing the behaviour of employers.

Improving the rate of detection of salary under-reporting, however, is difficult due to the problems involved in identifying such a wage arrangement during workplace inspections. This is because these formal employees have a written contract or terms of employment and a declared salary, and only 33% of employees receiving envelope wages would prefer full declaration, meaning that there is likely to be limited whistle-blowing from employees. Moreover, even those employees unhappy who might wish to whistle blow will be reticent about doing so for fear of losing their job. For this reason, a shift away from workplace inspections and towards data mining and matching, using dynamic benchmarking to identify anomalies/outliers, is required to detect under-declared employment. Databases are required that can analyse average earnings in firms, and cross tabulate this with average salaries in their region and/or sector, or by occupation, in order to identify outlier businesses paying below the average wage for their region and/or sector, or for particular occupations. However, this identification of potential outlier/anomalous organisations paying envelope wages, in order to enable more targeted inspections, does not help when it comes to proving salary under-reporting. It is unlikely employers and employees will admit to such a practice.

In consequence, there is a need for awareness raising campaigns and education about the benefits of fully declared work targeted at both employers and employees. For employers, such an awareness raising campaign should target small businesses in those regions and/or sectors where salary under-reporting is more prevalent, namely the agricultural, construction, hotel and restaurant, transport, repair services and retail sectors. For employees, meanwhile, such a campaign could be targeted particularly at the employee groups identified above, especially in small firms and the sectors where envelope wages are prevalent. This could focus upon the benefits of fully declared employment and the costs of receiving envelope wages in terms of the future benefits foregone. More widely, initiatives are also required to educate citizens about the benefits of taxation in terms of the public goods and services that they receive in return for the taxes they pay. Such policy initiatives might range from introducing into the civics curriculum in schools the issue of taxation and adhering to labour legislation, through letters to employees and employers as taxpayers about how their taxes are being spent, to signs stating ‘your taxes paid for this’ on fire engines, roads and ambulances, and in hospitals, doctors’ surgeries and schools.
Awareness raising and educational initiatives, however, will not alter the attitudes of employers and employees, and reduce under-declared employment, unless there is reform of the formal institutions, especially in countries where formal institutional deficiencies mean there is a lack of trust in government. On the one hand, this requires alterations in the macro-level structural conditions cited above that lead to lower voluntary compliance. On the other hand, the quality of governance needs improving. This is because voluntary compliance improves when employees and employers: believe they are treated in an impartial, respectful and responsible manner by state authorities; believe they pay their fair share compared with others, and believe they receive for the taxes they pay the public goods and services they deserve.

On average, 11.6% of total labour input in the private sector in the EU is undeclared, and undeclared work constitutes on average 16.4% of gross value added (GVA) (the difference due to undeclared labour being concentrated in sectors with higher labour productivity). These, however, are unweighted averages, and do not take into account the relative size of the labour force in each Member State. The weighted averages, therefore, are that 9.3% of total labour input in the private sector in the EU is undeclared, and undeclared work constitutes 14.3% of GVA in the private sector. The reason for the weighted average being lower than the unweighted average is due to the influence of larger countries such as Germany, France and the UK, which have larger labour forces and relatively lower levels of undeclared work.

There are significant differences in the size of undeclared work between Member States:
 For undeclared work as a proportion of total labour input – Poland, Romania and Lithuania have the highest levels of undeclared work, and countries exceeding the EU average are largely new EU Member States (NMS). Only the Czech Republic from the NMS has a smaller than EU average undeclared economy, with the lowest share of undeclared work in terms of labour input being found in the UK, Germany and the Netherlands (less than 3% of total labour input being undeclared).
 For undeclared work as a proportion of GVA – the distribution is similar to above, with undeclared work as a proportion of GVA being highest in Poland, Romania and Lithuania (all with undeclared work being over 25% of total GVA created in the private sector), and those with undeclared economies above the EU average again being mostly new Member States (Hungary, Latvia, Estonia, Bulgaria, Cyprus, Croatia and Czech Republic) with three older EU members: Greece, Spain and Italy. Only Slovakia and Slovenia from the NMS countries have undeclared economies slightly below the EU average.

There are significant differences in the prevalence of undeclared work amongst different groups of the employed:
 The proportion of self-employment which is undeclared by Member State ranges from 77.6% of all self-employment in Latvia, 73.2% in Romania and 70.6% in Cyprus, to just 6.5% in Belgium, 5.3% in Bulgaria, 3.4% in Italy and 2.5% in Poland;
 The proportion of work conducted in the context of an employment relationship which is undeclared ranges from 25.3% Poland, 19.3% in Bulgaria and 18.5% in Lithuania, to just 2.1% in Portugal, 1.5% in Germany, 1.4% in United Kingdom and 1.1% in the Netherlands; and
 The proportion of all family work which is undeclared ranges from 89.8% in Latvia, 69.4% in Estonia and 68.2% in Romania, to 4.2% in Austria, 2.9% in Italy and 2.1% in Sweden.

Examining the structure of the undeclared labour market in the EU, 61.8% of all undeclared work is work conducted in the context of an employment relationship, 37.3% is self-employment and 0.3% is family work. This masks considerable national variations – countries where the majority of undeclared work is conducted through self-employment include Cyprus, Netherlands, Portugal, Denmark and Germany; while those where over 90% of all undeclared work is conducted in the context of an employment relationship include Poland, Bulgaria and Italy.

These different structures have significant implications for tackling undeclared work. Policy initiatives to help business start-up on a legitimate basis, such as smoothing the transition from unemployment to self-employment, will be useful in countries where most undeclared work is conducted as self-employment (e.g. Denmark).  Conversely, in countries where most undeclared work is conducted in the context of an employment relationship (e.g. Poland), policy initiatives to address unregistered or under-declared waged employment, such as the use of notification letters to employers to change behaviour, will be most relevant. It is not only the development of tailored policy measures, however, that Member States need to pursue to tackle undeclared work. 

Evaluating whether cross-national variations in the size of undeclared work are associated with variations in various structural conditions, there is found to be:
 A strong significant relationship with GDP per capita in purchasing power standards (the greater the level of GDP in PPS, the lower the prevalence of undeclared work); and the quality of government (based on the European Quality of Government Index, where the higher the quality of government the lower the prevalence of undeclared work);
 A moderate significant relationship with: the Transparency International Corruption Perceptions index (which ranks countries according to perceived public sector corruption); a trust in authorities index based on World Economic Forum indicators; the impact of social transfers on poverty reduction; public expenditure on labour market interventions to protect vulnerable groups; the migration rate; the Gini coefficient and income inequality. Overall, the higher the perceived level of corruption, the lower the level of trust in public authorities, and the higher the perceived level of inequality, the higher the level of undeclared work; and
 A weak but significant relationship with the long-term unemployment rate; and with the very long-term unemployment rate – in both cases the higher the respective rates, the higher the level of undeclared work.
 No significant relationship was identified between undeclared work and the job vacancy rate or the implicit tax rate on labour – in the case of the latter, this refutes the common assumption that undeclared work is directly related to taxation levels.

In conclusion, lower levels of undeclared work are found in Member States where there are higher levels of GDP per capita, more modernised systems of government, higher levels of trust in authorities and lower levels of corruption, where social transfers are effective at reducing poverty, there are higher levels of public expenditure on labour market interventions to protect vulnerable groups, and where there is greater equality, lower levels of long-term unemployment, and net in-migration rather than out-migration.