Session

Management, Business and Economics

Description

Republic of Macedonia (RM) has high level of informal economy activity. It accounts for about 35- 40% of GDP. It has a direct influence to the main indicators, categories and instruments for macroeconomic planning and regulation. By using qualitative, descriptive, statistic and comparative methodologies, this research attempts to locate causes and consequences of informal economy in RM. It also presents different ways for measurement of the size of informal economy and understands the basic characteristics of the Macedonian case in order to present well‐grounded policy recommendations. The main finding of the paper is that the informal economy in The RM is a multifaceted phenomenon and the most efficient manner to remove the causes for the occurrence and presence of the informal economy is the improvement of the institutional frame in the country. There is a need for directly focused Government measures that would precipitate the integration of the informal economy in the formal sector, once the right conditions are put in place. The main recommendation that this paper promotes is directed towards activi ties and measures of the authorities for removing the reasons of informal economy appearance. Another recommendation is for the Government to increase the speed for redefining its role on the market. There is a need for widening the awareness of all busine ss players for the necessity of playing by the rules as well as for enforcing the institutional framework, legal order, moral values and the motivators of the countr y‘s functional economy.

Keywords:

informal economy; formal economy; scope; measurement, tax evasion

Proceedings Editor

Edmond Hajrizi & Mo Vaziri

First Page

290

Last Page

304

Location

Prishtina, Kosovo

Start Date

2-11-2012 9:00 AM

End Date

3-11-2012 5:00 PM

Included in

Business Commons

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Nov 2nd, 9:00 AM Nov 3rd, 5:00 PM

Causes and Effects of The Informal Economy – The Case of Macedonia

Prishtina, Kosovo

Republic of Macedonia (RM) has high level of informal economy activity. It accounts for about 35- 40% of GDP. It has a direct influence to the main indicators, categories and instruments for macroeconomic planning and regulation. By using qualitative, descriptive, statistic and comparative methodologies, this research attempts to locate causes and consequences of informal economy in RM. It also presents different ways for measurement of the size of informal economy and understands the basic characteristics of the Macedonian case in order to present well‐grounded policy recommendations. The main finding of the paper is that the informal economy in The RM is a multifaceted phenomenon and the most efficient manner to remove the causes for the occurrence and presence of the informal economy is the improvement of the institutional frame in the country. There is a need for directly focused Government measures that would precipitate the integration of the informal economy in the formal sector, once the right conditions are put in place. The main recommendation that this paper promotes is directed towards activi ties and measures of the authorities for removing the reasons of informal economy appearance. Another recommendation is for the Government to increase the speed for redefining its role on the market. There is a need for widening the awareness of all busine ss players for the necessity of playing by the rules as well as for enforcing the institutional framework, legal order, moral values and the motivators of the countr y‘s functional economy.