Characteristics of Undeclared Work in Service Sector in Countries of South East Europe

Abstract The undeclared work is a complex and multifaceted phenomenon that has been present in all countries, regardless of its social and political establishment. Notwithstanding, the empirical evidence suggests that informal economy is more prevalent in countries with lower levels of GDP. Furthermore, the informal economy is present in sectors with lower level of capital and higher level of labour intensity. Therefore, the theory and everyday experience imply that the informal economy is more widespread among the services than the goods sectors. This paper provides an overview on the informal work and unofficial economy in the services sector in the former socialist countries in South East Europe. For the reduction of undeclared activities, it is necessary to simplify the procedures for establishing small businesses, to stabilize the tax system, to ensure high tax morale and trust in society and towards institutions, and to decrease the state regulatory burden.