The Informal Economy in Azerbaijan

Abstract

This article looks at various estimates of the scale and composition of the informal economy in Azerbaijan, focusing on the extent and structure of informal employment. It shows that informal economic activity makes up a considerable part of the country’s GDP and that the share of informal employment is high. The extent of the informal economy has negative consequences for the state's collection of taxes and the social security protection of those employed without contract. Challenges for the foreseeable future include the ability of an oil-dependent economy to create jobs for the growing number of youths, risks associated with social security exclusion of informal workers, and the lack of political will to implement structural reform to eliminate informal payments and bureaucratic control of the economy.