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Purpose: Despite a widespread assertion that wages are lower in the informal than formal economy, there have been few empirical evaluations of whether this is the case and even fewer studies of the gender variations in wage rates in the formal and informal economies. Consequently, whether there are wage benefits to formal employment for men and women is unknown. The aim of this paper is to evaluate the wage differential between formal and informal employment for men and women. Design/methodology/approach: To evaluate the wage differential between the formal and informal economy for men and women, data are reported from a 2017 survey involving 8,533 household interviews conducted in Kosovo. Findings: Using decomposition analysis and after controlling for other determinants of wage differentials, the finding is that the net hourly earnings of men in formal employment are 26% higher than men in informal employment and 14% higher for women in formal employment compared with women in informal employment. Practical implications: Given the size of the wage differential, the costs for employers will need to significantly increase in terms of the penalties and risks of detection if informal employment is to be prevented, along with more formal employment opportunities using active labour market policies for vulnerable groups, perhaps targeted at men (who constitute 82.8% of those in informal employment). Originality/value: This is one of the first studies to evaluate the differentials in wage rates in the formal and economy from a gender perspective. [ABSTRACT FROM AUTHOR]

Purpose: The dominant theorisation of the informal economy views participants as rational economic actors operating in the informal economy when the expected benefits exceed the perceived costs of being caught and punished. Recently, an alternative theory has emerged which views participants as social actors operating in the informal economy due to their lack of vertical trust (in governments) and horizontal trust (in others). The aim of this paper is to evaluate these competing theorisations. Design/methodology/approach: To do so, data are reported from special Eurobarometer surveys conducted in 2007, 2013 and 2019 in eight West European countries (Austria, Belgium, France, Germany, Ireland, Luxembourg, the Netherlands and the United Kingdom). Findings: Using probit regression analysis, the finding is that increasing the expected likelihood of being caught and level of punishment had a weak significant impact on the likelihood of participating in the informal economy in 2007, and there was no significant impact in 2013 and 2019. However, greater vertical and horizontal trust is significantly associated with a lower level of participation in the informal economy in all three time periods. Practical implications: The outcome is a call for a policy to shift away from increasing the expected level of punishment and likelihood of being caught, and towards improving vertical and horizontal trust. How this can be achieved is explored. Originality/value: Evidence is provided in a Western European context to support a shift away from a rational economic actor to a social actor approach when explaining and tackling the informal economy. [ABSTRACT FROM AUTHOR]