Institutional Trust and the Informal Sector of Georgia

Abstract

This article uses empirical data from Georgia to show how informal sectors participants - self-employed entrepreneurs and micro firms - are organized. Though they differ in their activities and education, they display the same motivation, attitude to formality and attitude to risk. Facilitating business registration through tax incentives is therefore not sufficient. The article also identifies the low level of trust in institutions as a barrier to the inclusion of the informal sector into the formal structures of the economy.