Narrow Results

We studied how environmental regulation affects the ecological environment from the perspective of an underground economy. The theoretical model shows that environmental regulation exerts both direct and indirect effects — via the underground economy — on environmental pollution, and that the underground economy is unfavorable for the environment. Empirical results show that all the effects (direct, indirect, and total) of environmental regulation are insignificant, and the enforcement of environmental regulation may increase smog emissions with the expansion of the underground economy; smog pollution will increase with the strengthening of environmental regulation. Moreover, the underground economy shows a remarkable spatial effect when using spatial distance or spatial economics weights matrix.

How many entrepreneurs start-up their business ventures conducting some or all of their trade in the informal economy? The aim of this paper is to answer this key question that has been seldom addressed using data from 600 face-to-face structured interviews conducted in Ukraine in late 2005 and early 2006. Analyzing the 331 entrepreneurs identified (i.e., individuals starting-up an enterprise in the past three years), just 10 percent operate on a wholly legitimate basis, while 39 percent have a license to trade and/or have registered their business but conduct a portion of their trade in the informal economy, and 51 percent operate unregistered enterprises and conduct all of their trade on an off-the-books basis. Given that some 90 percent of all business start-ups operate partially or wholly in the informal economy, and that 40 percent of all respondents depend on the informal economy as either their principal or secondary contributor to their livelihoods, the paper concludes by considering the wider implications of these findings both for further research and public policy.

Mirroring the representation of informal workers in a third world context as displaying entrepreneurial qualities, recent years have witnessed the emergence of a similar view of the informal sector in western nations as a hidden enterprise culture. Until now, however, few attempts have been made to analyze the nature and motives of informal entrepreneurs in western economies. Instead, it has been widely assumed that those engaged in entrepreneurship in the informal sector are those marginalized from the formal economy and driven out of necessity into this endeavor as a last resort. The aim of this paper is to evaluate critically this "marginalization thesis". Reporting the findings of face-to-face structured interviews with 130 informal entrepreneurs in England, the conventional representation of these entrepreneurs as necessity-driven, as well as an emergent depiction of them as opportunity-driven, is transcended. Instead, a richer and more textured understanding of informal entrepreneurship is developed that replaces such either/or thinking by a both/and approach that depicts how the majority are concurrently both necessity- and opportunity-driven. The paper then concludes by exploring the public policy implications of this rereading of the nature of informal entrepreneurship in western economies.

Even though entrepreneurs are commonly depicted as risk takers, little evaluation has occurred on whether they weigh the costs of being caught and the level of punishments, and engage in off-the-books working practices. The aim of this paper is to evaluate the degree to which entrepreneurs engage in such off-the-books work. Reporting a survey conducted in Moscow during late 2005 and early 2006 of 81 entrepreneurs (defined here as individuals starting-up an enterprise in the past three years), just 3.7 percent are found to operate on a wholly legitimate basis. The remaining 96.3 percent have not registered their business, have no license to trade and conduct all of their trade on an off-the-books basis. The outcome is a call to move beyond the wholesome and virtuous ideal-type of legitimate super heroes that pervade textbook depictions of entrepreneurs and toward a fuller understanding of the lived realities of entrepreneurship.

In recent decades, the field of entrepreneurship studies has become increasingly interested in the relationship between entrepreneurship and the informal economy. This paper reviews this burgeoning sub-field of entrepreneurship studies that recognizes how entrepreneurs do not always conduct their business affairs wholly by the rulebook. Evaluating this rapidly growing body of literature, it reviews the findings regarding the preponderance of entrepreneurs to engage in the informal economy, the nature of such informal entrepreneurship, the characteristics of informal entrepreneurs and the motives underpinning participation in such endeavor, along with the competing theories that have sought to explain engagement in this type of entrepreneurship. The tentative finding is that there are marked socio-spatial variations in the prevalence and nature of informal entrepreneurship, the characteristics of informal entrepreneurs and their rationales. The implication is not only that different theorizations of informal entrepreneurship apply more in some populations than others, but also that some populations usually seen as lacking in entrepreneurial spirit are perhaps more enterprising and entrepreneurial than currently recognized. Consequently, legitimizing this hidden enterprise culture could be an important means of promoting enterprise and economic development in such populations. The paper concludes by highlighting future avenues for research on this subject.

Despite a widespread recognition in the mainstream entrepreneurship literature that many legitimate entrepreneurs do not pursue purely profit-driven commercial goals, the small but burgeoning literature on entrepreneurship in the informal economy has assumed entrepreneurs operating wholly or partially on an off-the-books basis are commercial rather than social entrepreneurs. To evaluate critically this assumption, evidence is reported from a survey involving face-to-face interviews with 70 informal entrepreneurs located in deprived and affluent urban and rural English localities. The finding is that informal entrepreneurs range from those pursuing purely commercial ends through to purely social entrepreneurs pursuing solely social logics, with the majority situated somewhere in-between combining both commercial and social objectives. The outcome is a call to recognize that not all informal entrepreneurs are purely commercial entrepreneurs and that the commercial versus social entrepreneurship dichotomy will need to be transcended if the multifarious goals underpinning informal entrepreneurship are to be better understood.

The aim of this paper is to evaluate critically the gender variations in informal sector entrepreneurship. Until now, a widely-held belief has been that entrepreneurs operating in the informal sector in developing nations are lowly paid, poorly educated, marginalized populations doing so out of necessity as a survival strategy in the absence of alternatives. Reporting an extensive 2003 survey conducted in urban Brazil of informal sector entrepreneurs operating micro-enterprises with five or less employees, the finding is that although less than half of these entrepreneurs are driven out of necessity into entrepreneurial endeavor in the informal economy, women are more commonly necessity-driven entrepreneurs and receive lower incomes from their entrepreneurial endeavor than men despite being better educated. The outcome is a call to recognize how the gender disparities in the wider labor market are mirrored and reinforced by the participation of men and women in the realm of informal sector entrepreneurship.

While the underground economy is not explicitly included in the measure of (GDP), the cocaine trade has been a major source of revenue for Colombia. Using quarterly cocaine prices from 1982 to 2007 published by the Office of National Drug Control Policy, this paper uses vector error correction and forecast error variance decomposition methods to look at the relationship between cocaine prices and the peso/$ nominal exchange rate. Our results indicate cocaine prices affect the value of the Colombian peso, which leads to some interesting policy implications.

Digitalization of the financial sector in the era of globalization has made it highly vulnerable to misuse for money laundering and terrorist financing. At the same time, the financial innovations due to digitalization have led to higher financial inclusion, especially in areas where there is no or limited access to regular banking facilities. To tackle the increased risk of money laundering and terrorist financing, the European Union, among other jurisdictions, has significantly increased regulation and supervision while balancing the security of financial inclusion. One of the issues with intensifying regulation in one sector or jurisdiction is that actors that need to operate in a less regulated and surveilled economy will tend to switch their sector, jurisdiction, or method of getting financial services. One available alternative, which has gathered much attention in recent years, is the hawala remittance system. Especially within the area of anti-money laundering and terrorist financing, the hawala system has been of great interest, as it gives criminals alternative ways of moving wealth outside of the regulated financial sector. This chapter seeks to understand the hawala system in its essence, considering the problems and regulatory dilemmas that this financial alternative creates in a modern financial system.