Living with Institutions: A Micro-Level Explanation of Informal Economic Activity

Informal economic activity (IEA) plays a significant part in the service sector, although it remains relatively underexplored. This thesis applies a qualitative case study approach to explore why a group of small service sector business owners within a developed economic setting adopt informal practices. The theoretical contribution of this research is the development of a micro-level understanding of informal activity within an institutional environment over time. This account complements and builds upon existing understandings of the informal economy using Critical Realist (CR) insights and a generative view of causation. CR has been operationalised in this study through the work of Margret Archer and her morphogenetic framework. This is used as a model to understand how the institutional environment affects practice, and acts as an orientating lens to organise and understand the causal importance different institutional factors have over time. The findings from this study indicate that IEA is the result of the temporal relationship between institutional factors. The structural conditioning of decision making is the result of exposure to informal employment arrangements early in the actor’s career. Whereas formal institutional failures at the interaction stage provide the situational circumstances where IEA becomes the most appropriate situational response. The findings also indicate that institutional carriers can actively promote IEA through institutional messages which have a significant causal influence on the actor’s future practice. This thesis concludes by outlining the implications of the findings from this research for policy and future research agendas.