Experiences, causes, and measures to tackle institutional incongruence and informal economic activity in South-East Europe

To explain the prevalence and persistence of informal economic activity globally, scholars have recently advanced an institutional incongruence perspective. Institutional incongruence exists where there is a misalignment between what is considered legitimate by a society’s formal institutions (e.g. its laws and regulations) and its informal institutions (e.g. norms, values and beliefs). Reporting findings from a series of qualitative focus groups in Bulgaria, Croatia and the Former Yugoslav Republic of Macedonia, this paper explores relationships between such institutional incongruence and informal economic activity. In particular, it sheds light on how informality and institutional incongruence are experienced by individuals in South-East Europe. It furthermore provides insights on the causes of such incongruence, and how it can lead to informal economic activity. Finally, it reports on individuals’ perceptions towards different measures to tackle institutional incongruence and informal economic activity, with implications for policy makers in South-East Europe and more widely.