Comparative Economic Studies

, Volume 57, Issue 1, pp 1–30 | Cite as

Informal Employment in Transition Countries: Empirical Evidence and Research Challenges

  • Hartmut Lehmann
Presidential Address


Even though informal employment is widespread in transition economies, the literature on this phenomenon in the region is rather scarce. For policy makers it is important to know the incidence and the determinants of informal employment. In the first part of the paper we demonstrate that its incidence and to a lesser degree its determinants depend on the definition used. We then discuss studies that attempt to test for labor market segmentation in transition economies along the formal–informal divide. The presented results are inconclusive, and we come to the conclusion that more work needs to be done before we can make definitive statements about whether labor markets are integrated or segmented in transition economies. Last but not least we introduce a new research area that links risk preferences and selection into labor market states. We show that if individuals have a choice, relatively risk-loving workers have an increased likelihood to choose informal employment and self-employment.


informal employment definitions determinants risk preferences transition economies 

JEL Classifications

D03 J43 P23 



This paper is based on my presidential address to the 2014 Annual Meeting of the Association of Comparative Economic Studies, which I presented on 4 January 2014 in Philadelphia, Pennsylvania. I am grateful to Olivier Bargain, Thomas Dohmen, Melanie Khamis, Norberto Pignatti, Tiziano Razzolini and Anzelika Zaiceva for allowing me to draw on joint work. Comments by Josef Brada, John Bennett and by participants of the ASSA meetings in Philadelphia and of the Second International Conference of the Institute for East and Southeast European Studies in June 2014 in Regensburg, where I gave an invited lecture on the same topic, are gratefully acknowledged. I am also grateful to the Fritz Thyssen-Foundation for partial financial support within the project ‘Risk attitudes and labor market informality: with a case study of Russia’. The opinions expressed in this paper are mine and should not be attributed to the University of Bologna or IZA.


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Copyright information

© Association for Comparative Economics 2015

Authors and Affiliations

  • Hartmut Lehmann
    • 1
    • 2
  1. 1.University of BolognaBolognaItaly
  2. 2.Institute for the Study of Labor (IZA)BonnGermany

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