Digital Technologies and Informal Market Transactions: Who Buys and What Drives Their Choices?

This research is motivated by the growing intersection between digitalisation and informal economic activity in the European Union. Despite the expansion of other distribution channels, informal markets remain prevalent in numerous economies, making it crucial to understand the drivers of purchasing decisions in these markets. This empirical investigation seeks to bridge an existing gap in literature by identifying the key determinants of purchasing behavior in informal markets with the advent of digital technologies, while also examining the influence of socio-demographic factors. To achieve this, the study builds a purchasing decision-making framework particularly to informal markets by blending socio-demographic variables from the Undeclared Work Eurobarometer with digital technology adoption variables from the Digital Technologies Eurobarometer. The large-scale datasets are harmonized by employing statistical matching techniques to establish a common analytical framework. Moreover, Random Forest and other machine learning approaches are employed to validate the model. The results highlight the role of digital infrastructure and accessibility and offer a comprehensive view of all socio-demographic characteristics that interact with digitalization to understand the informal market dynamics in detail. These findings contribute to the academic discourse and provide evidence-based insights for policymakers seeking to regulate and integrate informal transactions into an increasingly digitalised world economy.