On the notions and on the social functions of the informal economy in Eastern Europe

In State socialist countries, a blossoming informal economy helped to mend the malfunctions of the economy and to complement the livelihood of the households. Since 1990, the transformational crisis in Eastern Europe brought about mass poverty and social precariousness, which, in better-off countries like Hungary, struck only some minorities-but in low-performing countries like Romania, large groups fell into poverty, and the majority of the population suffers social insecurity. The households concerned are in need to complement informally their livelihood. In countries like Hungary, this makes rather a secondary income-in poverty regions like Romania, the informal economy has become necessary for the living or even surviving of large parts of the population, just like in many regions of the Third World, in particular like in Latin America. Four types of the informal economy are explained from empirical research: the improving informal economy, complementing formal employment and/or social transfers, and which even in low-performing countries allows for social security or well-being; criminal side activities, whose social functions are quite limited; the informal business performed by the precarious self-employed or small accumulating entrepreneurs-its development potentials are quite controversial; and the survival economy performed by subsistence farmers and casual workers, and which makes a social trap-the larger the groups concerned, the more the respective country has to deal with marginalization.