ABSTRACT
This chapter aims to test the validity of the institutional asymmetry explanation by examining a particular vulnerable population. To evaluate envelope wage agreements among students in Moldova and Romania, it presents the results of a 2016 questionnaire survey involving 497 students. Of the 497 students who completed the survey conducted in Moldova and Romania, 237 were with students who reported that they work or have worked during their time as a student. Strong evidence also exists that envelope wage practices are more prevalent among employed students in Moldova than in Romania. The tentative finding is that vulnerable employees are more likely to accept envelope wage arrangements and thus are more likely to be targeted by employers. Envelope wages represent 52.3% of the shadow economy in Estonia, 42.9% in Lithuania and 39.2% in Latvia. If the propensity of unemployed students to accept envelope wages if a job was offered tomorrow is analyzed, the results show that tax morality matters.
