X - GRANULAR EXAMINATION OF THE INFORMAL ECONOMY IN NORTH MACEDONIA

The different measurements of informal activity arise from the elusive definition of informal economy as the concept is not strictly related to the firms that fail to register to avoid regulatory standards, but also to the tendency of formal firms to underreport revenues and hire workers to avoid the costs of tax and labour regulations. [...] The understanding of the extent and complexity of the informal economy is important for many reasons: 1) the reduced tax collections stimulate further tax noncompliant behavior and reduced quality of public services; 2) the tax noncompliance affects the decisions of workers and firms for working and investments; 3) the large extent of noncompliance requires resources and investments in enforcement. [...] According to Williams and Bezeredi (2018), the more the perceived governmental corruption, the lower the tax morale and the higher the acceptability of small entrepreneurs’ informality. [...] On the other side, the undeclared work in the second largest sector in terms of GVA, NACE G - Wholesale and retail trade; repair of motor vehicles and motorcycles, constitutes a lower percentage of GVA, 9.1 per cent, due to the lower productivity of the labour input in this sector. [...] We use the household head’s age, the number of members in the household and dummies for car possession (as a proxy for physical assets) and for education level to control the effects of household characteristics on housing costs.11 Additionally, we analyze underreporting differences from three aspects: the occupation of the household head, the level of household income and the educational level of.