Financial Satisfaction and (in)formal Sector in a Transition Country

• Published in: Social indicators research Vol. 102; no. 2; pp. 315 - 331
• Main Authors: FERRER-I-CARBONELL, Ada, GERXHANI, Klarita
• Format: Journal Article
• Language: English
• Published: Dordrecht Springer 01.06.2011; Springer Netherlands; Springer Nature B.V
• Subjects: Albania; Attitudes; Behavioral Sciences; Developed Nations; Developing Nations; Econometrics; Economic Factors; Economic sociology; Economic transitions; Economics; Empirical research; Employment; Financial Problems; Fiscal policy; Foreign Countries; Heterogeneity; Human Geography; Income taxes; Informal economy; Informal Sector; Interpersonal Relationship Satisfaction; Job Applicants; Labor; Labor Market; Life Satisfaction; Microeconomics; Morale; Organizational Change; Participation; Personal finance; Public economics; Public Health; Quality of Life Research; Quality of Working Life; Questionnaires; Resource Allocation; Safety; Satisfaction; Security (Psychology); Social Indicators; Social research; Social Sciences; Social security; Sociology; Sociology of economy and development; Sociometric Techniques; Standard of living. Income; Studies; Tax evasion; Taxation; Taxes; Taxpaying; Transition economies; Transitional economies; Underground economies; Unemployment; Work Environment; Albania; Transition; Tax morale; Financial satisfaction; Informal sector; Informal Sector; Standard of Living; Transition to capitalism; Financial resource; Income; Satisfaction
• ISSN: 0303-8300; 1573-0921
• DOI: 10.1007/s11205-010-9684-6

This paper examines the relationship between working in the formal or informal sector and self-reported individual financial satisfaction in a country in transition. It does so by allowing for individual heterogeneity in terms of perceived financial insecurity and tax morale. The empirical analysis uses a dataset for Albania, a country in transition. The method applied is the 'self-administered questionnaire', which combines personal contacts with written questionnaire. The results indicate that, for most individuals, working in the informal sector has negative effects on their self reported financial satisfaction. For some individuals, however, this effect is positive. The characteristic defining these two groups of individuals is their attitude towards the perceived financial insecurity related to not paying taxes. These findings have important implications, in particular for transition countries with large informal sectors. Given the involuntary participation in the informal sector in these countries, the majority of individuals working in this sector will remain financially dissatisfied as long as they have no other social safety net.