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Article

Informal Economy in Russia: A Brief Overview

Economic sociologists in Russia have always paid much attention to studying informal and shadow economy. They apply structural and institutional insights as two complementary approaches to the definition of the informal economy. When following the structural approach suggested in the early 1970s by Keith Hart, informal economy is defined as a set of economic activities which are not displayed in official reporting and/or formal contracting. This kind of informal economy consists of two major sectors. The first sector is presented by the unobservable economy of the households largely confined to subsistence production and redistribution, including informal work at the private land plots, informal credit relationships, and inter-family mutual aid. People employed in the informal household economy do not consciously conceal their activity from the state; the state just overlooks them. The second sector is made up of the shadow economy, which involves enterprises consciously hiding their revenues in order to lessen their tax base. The shadow economy entails the non-registration of enterprise or some parts of the enterprise activity, employing a workforce without formal contracts and double book-keeping. Unlike the informal activities of households, the shadow activity of enterprises ought to be reported to the statistical and tax authorities, but in spite of this, such activity is often concealed from them (Barsukova 2000; Radaev 2002a). There is a relatively small but important part of the shadow economy associated with the illegal markets. They deal with the goods and services prohibited by the law (drug trafficking, prostitution, etc). Studying these markets is highly relevant for economic sociology (Beckert, Wehinger, 2011). Within the framework of the institutionalist approach, the informal economy was put into a broad framework delineating all informal relationships that accompany formal institutions, in order to make them run smoothly and to compensate for their failures. An informal economy of this kind is an integral component of activities for all market actors. In this overview, we discuss the major outcomes of the studies of the Russian informal economy, including the rise of the shadow economy in the Post-Soviet era, corruption and violence in business, the maintenance of inter-family reciprocal exchanges and the progressive legalization of business activities.