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

Ada Ferrer-I-Carbonell, Klarita Gërxhani

Social Indicators Research

|April 26, 2011

Summary

Working in Albania's informal sector generally lowers financial satisfaction due to tax insecurity. However, some individuals experience increased satisfaction, depending on their tax morale and perceived financial insecurity.

Area of Science:

Socioeconomics
Transition Economics

Background:

The informal sector is a significant feature of economies in transition.
Understanding its impact on individual financial satisfaction is crucial for policy-making.

Purpose of the Study:

To investigate the relationship between formal/informal sector employment and financial satisfaction in Albania.
To analyze the role of perceived financial insecurity and tax morale in this relationship.

Main Methods:

Empirical analysis using a dataset from Albania.
A mixed-method approach combining personal contacts with self-administered questionnaires.

Main Results:

Informal sector employment typically leads to lower financial satisfaction.

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A subset of individuals experiences higher financial satisfaction, linked to their attitude towards tax-related financial insecurity.

Tax morale and perceived financial insecurity are key differentiating factors.

Conclusions:

For most, informal sector work in transition economies negatively impacts financial satisfaction, especially without a social safety net.
Policy interventions should consider the heterogeneity of experiences within the informal sector and address underlying financial insecurities.