Why do Consumers Buy from Informal Sector Suppliers in East-Central Europe? A Case Study of Home Repair and Renovation Services

Abstract

This paper seeks to explain consumers’ reasons for purchasing from informal sector suppliers so that policy initiatives can be developed to tackle the off-the-books consumer culture. The conventional assumption is that those purchasing from the informal economy are marginalised populations seeking a lower price. Here, however this assumption is evaluated critically. Reporting data from a 2019 Eurobarometer survey involving 11,171 face-to-face interviews in 11 East-Central European countries on who purchases home repairs and renovations from informal sector suppliers and why, the finding is that it is not the poorest populations who purchase such services and a lower price is the sole motive in just 20% of cases. Besides being “pulled” into the informal economy by a lower price, consumers are also “pushed” into the informal economy by the failures of formal sector provision and in addition do so for social and redistributive rationales. The policy implication is that there is not only a need to alter the cost-benefit ratio facing consumers so that they purchase formal services, but also initiatives are required to enhance the availability, speed, reliability and quality of formal sector provision and to address purchases made for social and redistributive reasons.