Patterns of informal trade in Petropavl, Kazakhstan

Abstract

Several factors constrain or enable informal trade, ranging from the living conditions of the population, for whom it is often the most viable form of livelihood, to the national institutional framework, to the typology of goods being traded. The characteristics and extent of informal trade are explored in light of the observation of these activities in the northern region of Kazakhstan. The analysis, based on fieldwork and interviews with key stakeholders such as traders, tax inspectors, and local authorities focuses on the practices and interacting institutions of informal trade. The findings show that traders employ two methods to bypass state regulations: personal networks based on trust (blat), or pecuniary exchange with or without personal connections. The thesis explores what determines traders’ choice of one method or the other in any given situation. Labor market rigidity, weak institutions, the tax system and excessive financial regulations are identified as major drivers of the development of informal trade activities. Thus, the findings suggest that informal trade is a response to changes in market conditions and regulatory regimes, especially under the adverse social, economic, and even political outcomes of the current economic recession.