Understanding the Puzzle of Informal Employment in Georgia. Implemented in partnership with the Institute for the Study of Labor (IZA), this research project seeks to analyze the links between informal and formal labor markets in Georgia, providing an opportunity to assess the impact of changes in labor legislation introduced as part of the effort to approximate Georgia's legal and regulatory environment to that of the EU.
Until 2013, Georgia has had a very liberal labor code in place, implying that formal employment offered little extra job security or benefits. The study looked at the changes in the formal/informal wage gap and in mobility between job market states. The project collected data on informal employment in Georgia and analyzed how individual perceptions of the social security system and risk attitudes affect workers' self-selection into employment types and the incidence of informal employment. The project also developed policy recommendations concerning labor market regulations and improvements in the legal and tax environment to reduce the scope and scale of informality in the Georgian labor market.