In from the Shadow: Integrating Europe's Informal Labor (Directions in Development)

This book is about the millions of people who earn a living working full- or part-time in Europe's untaxed markets for goods, services, and labor. Their activities are not registered as part of the economy, and because they go unrecorded, they are also unregulated. This makes them illegal, although not in essence criminal. Some call this the 'underground economy,' the 'black market,' or the 'shadow economy.' As governments in Europe struggle to manage the fiscal legacies of the global financial crisis and the prospect of rapidly aging populations, the circumstances that lead people to work and trade in the shadow economy have grown in importance. In From the Shadow focuses on the objective of policy makers in the EU's new member countries to bring as much economic activity in from the shadow economy as they can. The authors venture a general conclusion: Although it may be necessary to improve the structural incentives created by taxation, labor market regulation, and social protection policies, doing so is not sufficient to achieve real improvement. As important, is a government's credibility in the eyes of working people in carrying out the state's unique and critical role of providing and maintaining public goods. The process of improving governance and increasing institutional credibility is long and difficult, but key to changing the circumstances that lead people into the shadowy unregulated and untaxed markets. From the conceptual framework and empirical evidence presented in this book, a set of general policy suggestions can be formulated that are relevant for all the EU's new member states, those that aspire to join the EU, and indeed for middle and upper-middle-income countries in other parts of the world.