Redefining Informality and Measuring its Determinants: Evidence from the Russian Labour Market

Although informality impacts countries' economic development, the recent recession may have increased the incidence of informal activities. We take advantage of a rich data set on Russia before and after the economic downturn and demonstrate that the incidence of informal employment varies across the definitions. However, the determinants of informal employment are roughly stable across different measures, apart from firm size. Employing a direct measure of risk attitudes, we also show that risk‐averse individuals are less likely to select themselves into informality. Regressions suggest a lower likelihood to be a formal employee post‐2008, especially for individuals with little education and immigrants.