The impact of institutions on informal employment in Vietnam

Informal employment is an essential part of economy of many countries in the world. Although informal economy is more often associated with developing countries, it is also part of developed countries but less prevalent. It plays an important role in creating jobs for less educated people without sufficient qualification. There are also individuals and companies who have intentionally moved to the informal sector to avoid paying taxes and complying with laws. The size of the informal economy tends to get smaller with the country's development. The institutional environment has a great influence on the economic success of countries. Thus, institutional quality is an important factor in reducing informal employment. In Vietnam, the prevalence of informal employment has been falling. Weak enforcement of property rights, mistrust in the judicial system, unfair allocation of resources and unequal business conditions create incentives for informal activities to thrive. Nevertheless, in recent years, there have been efforts to streamline administrative procedures, reduce bureaucratic burdens, simplifying tax return and provide better protection for workers which led to a gradual decrease of informal employment.