Research on the Informal Economy

This week I started a research project with a few students in which we are trying to get a handle on the behavior of entrepreneurs in the informal economy (those that sell household wares, agricultural products, and other goods bought at wholesale and sold in an open market). We are trying to get an estimate on how these folks behave in terms of taxation --and evasion -- due to the fact that their work is hidden from formal government reporting. 

Previous research proposed that these entrepreneurs will maximize their private returns regardless of the cost to society (by avoiding taxes), yet this belief has been questioned recently and seems to be more complex  here in Moldova. 

So in order to get a better idea of how these entrepreneurs behave, we set out in one of the large open markets near our home and began to survey them. I had my two students conduct all the interviews/questioning (in Russian or Romanian) and we are pleased with the response rate so far. Most folks answered the questions (we didn’t ask for any personal information) and they appeared to be very forthright. I think my students explaining that we were not from the government and have no interest in reporting anything except cumulative data helped the merchants' willingness to respond. 

The open market commerce here is quite significant given the great strides in development that has occurred during the past decade. It has been within the past 8-10 years that grocery stores became prevalent here in the city of Chisinau, and they are still only common in the cities throughout the country. Yet, many people still shop and sell items in these street markets. In the market that we walk to, it is quite a picture in contrasts as on the same street where people are selling everything from valves for plumbing to vegetables to shoelaces, there is also a nice grocery store and a high-end electronics store. Also, right across from where people sell any cut of meat you could want, out in the open, a new, really nice specialty meat shop/deli just opened last week. It will be interesting to see how long the open markets last as the economy continues to grow and transition.

We have another scheduled survey at the biggest marketplace in Chisinau next week, so hopefully we’ll have some more data to work with.  It will be interesting to see what we find.