Aspects of the Informal Economy in a Transforming Country: The Case of Romania

The informal economy has played a large part in state socialist countries and has been growing since 1989 in eastern European countries. Based on qualitative interviews and a large-scale survey carried out in Romania in 1996 and 1998, this article identifies four forms of informal household economies. In the context of a long drawn-out transformational recession in Romania, market conditions are rather unfavourable for most branches of the informal economy, which two-thirds of all Romanian households participate in. Success or failure depend largely on household potential and personal skills. A large group of households, which depend primarily on subsistence farming or on occasional manual labour, is trapped in a survival economy. Households that combine formal and informal jobs mostly manage to escape poverty, and the better off can raise their standards of living through informal activities, especially those who are independent and provide qualified services or those who carry out informal activities related to their formal employment in firms. A small group of informal entrepreneurs struggles between the two extremes of successful accumulation and a situation of dependency. Economically, subsistence farming exacerbates the crisis in agriculture, whereas in other branches of the informal economy there are more positive than negative impacts on overall economic development. Copyright Joint Editors and Blackwell Publishers Ltd 2002.