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Fighting the Shadows: Lithuania’s Informal Workers and the Financial Crisis

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Abstract

After a short delay, the global financial crisis reached Lithuania in 2009, severely impacting the country’s economy. It led to the bailouts of several banks and bankrupted companies; unemployment rose steadily. To revive the financial sector, economic experts and foreign advisory boards suggested that large sums could be recovered from Lithuania’s ‘shadow economy’. In 2010 the informal economy was estimated to account for between 27% and 33% of the country’s GDP.1 In this calculation, smuggling of goods was ranked as the highest contribution, followed by undeclared work and services. The annual loss of tax to the shadow sector amounted to 2.4 billion euro-equivalent. Informal work had been a noticeable issue since Lithuania regained independence in 1990, but had hitherto not attracted much attention in the media. Now, in the light of the financial crisis, the lack of control of informal work was singled out as one of the main problems of Lithuania’s economy, and the issue frequently appeared in newspapers and on TV. New legal initiatives tightened the grip on shadow workers, just as campaigns against illegal work were initiated, both attempting to scare people into the formal sector and appeal to their feeling of solidarity with the state and their fellow citizens. Shadow workers had become a thorn in the side of the state.

Keywords

  • Informal Sector
  • Shadow Economy
  • Informal Economy
  • Formal Employment
  • Downward Mobility

These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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© 2015 Ida Harboe Knudsen

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Knudsen, I.H. (2015). Fighting the Shadows: Lithuania’s Informal Workers and the Financial Crisis. In: Morris, J., Polese, A. (eds) Informal Economies in Post-Socialist Spaces. Palgrave Macmillan, London. https://doi.org/10.1057/9781137483072_4

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