Explaining cross‐national variations in the prevalence of envelope wages: some lessons from a 2013 E urobarometer survey

Abstract

Abstract The aim of this article is to evaluate competing theories that variously explain the greater prevalence of envelope wages in some countries either as: a legacy of under‐development (modernisation thesis); due to high taxes, state corruption and burdensome regulations and controls (neo‐liberal thesis), or a result of inadequate state intervention in work and welfare arrangements, which leaves workers less than fully protected (political economy thesis). Reporting a 2013 survey of cross‐national variations in the prevalence of envelope wages, the finding is that the results refute the neo‐liberal thesis but support both the modernisation and political economy theses, revealing that this illegitimate wage practice is more common in poorer, less equal countries with lower taxation and social protection levels and less effective redistribution via social transfers. The theoretical and policy implications are then discussed.

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