Institutions and informa economy in Algeria

Abstract

The informal economy is a social and economic phenomenon that one cannot ignore; especially with its effects on the official economy. Consequently, policy makers and academicians have made concerted efforts to estimate its size, and to determine its main causes. Moreover, among the main drivers and the causes of this economy are the state formal regulations on economic activities. The emphasis of this research will be on the impact of both formal and informal institutions on the economy, by conducting a field survey in the economic sector based on 150 economic enterprises in different regions of the west of Algeria. Our results basing on the PLS-SEM modeling show that trust in public institutions and the persistence of the informal institutions including the rules of old regime, in addition to the adjustment to formal institutions affect the economic agents to go underground. But what are of paramount importance are informal institutions, such as informal rules and social norms that are deep-rooted in the society’s culture and are influenced by historical patterns, and thus take too much time to be changed