The Functionality of Informal Practices as Survival and Re-Distribution Mechanisms

Master's Thesis from the year 2021 in the subject Economics - Other, grade: Distinction, , language: English, abstract: This thesis quantitatively examines the socio-economic role of informal practices through the lens of informal payments and gifts in the public service sector in 29 post-Socialist transition economies. Taking data from the EBRD¿s and World Bank¿s Life in Transition Survey III and using a robust country fixed-effects logit model, it was found that informal practices and corruption in the form of informal payments and gifts have different social-economic functionalities. While corruption, defined as demanded payments, have an impoverishing effect, informal practices in the form of ¿gratitude¿ or ¿greasing the wheels¿-payments are not found to burden the poor. The use of informal payments and gifts as an egalitarian-motivated redistribution mechanism to underfunded public service staff could not be confirmed. Further, it was found that depending on the practice either formal or informal aspects were significant for informal budget users.