remain low. As the social norms that surround acceptance of undeclared work and negative perceptions of the government are so deeply rooted in society, changing informal institutions will be difficult before a change in formal institutions surfaces. This makes changes to formal institutions a key priority. In accordance with this, Figure 6.7 presents a hierarchy of needs for Croatia, developed using the typology of policy measures to tackle undeclared work (Williams, 2014). This framework is presented as a more appropriate tool for transition countries, along with those that have weak social contracts or high levels of perceived corruption. Figure 6.7- Hierarchy of needs for Croatia As the discussion of the findings pointed to a problem with using direct measures and changing norms, it is evident that in Croatia it is not sufficient to use a combination of policies to achieve a best outcome. Instead, the individual policies have to be formed as part of a larger plan, where priorities are placed, as is detailed in the hierarchy of needs. The following section, therefore, outlines some policy options that can be adopted to change formal and informal institutions. 6.3.2 Improving vertical relations: Changing formal institutions Improving vertical relations by changing formal institutions is the first step to create a more positive social contract between the citizens and the state. From the anthropological/sociological perspective of social exchange theory, and the evidence of a damaged or non-existent social contract between the citizens of Croatia and the state, focus on improving formal institutions should lie with improving the relationship and focusing on aspects such justice and fairness. From the rational choice perspective on the other hand, emphasis should be placed on more tangible resources. This would therefore involve improving goods and services, reducing taxes, as well as improving the ease of registration for businesses and eliminating bureaucratic barriers. Due to particularly low levels of trust in government, emphasis is placed on the
remain low. As the social norms that surround acceptance of undeclared work and negative perceptions of the government are so deeply rooted in society, changing informal institutions will be difficult before a change in formal institutions surfaces. This makes changes to formal institutions a key priority. In accordance with this, Figure 6.7 presents a hierarchy of needs for Croatia, developed using the typology of policy measures to tackle undeclared work (Williams, 2014). This framework is presented as a more appropriate tool for transition countries, along with those that have weak social contracts or high levels of perceived corruption. Figure 6.7- Hierarchy of needs for Croatia As the discussion of the findings pointed to a problem with using direct measures and changing norms, it is evident that in Croatia it is not sufficient to use a combination of policies to achieve a best outcome. Instead, the individual policies have to be formed as part of a larger plan, where priorities are placed, as is detailed in the hierarchy of needs. The following section, therefore, outlines some policy options that can be adopted to change formal and informal institutions. 6.3.2 Improving vertical relations: Changing formal institutions Improving vertical relations by changing formal institutions is the first step to create a more positive social contract between the citizens and the state. From the anthropological/sociological perspective of social exchange theory, and the evidence of a damaged or non-existent social contract between the citizens of Croatia and the state, focus on improving formal institutions should lie with improving the relationship and focusing on aspects such justice and fairness. From the rational choice perspective on the other hand, emphasis should be placed on more tangible resources. This would therefore involve improving goods and services, reducing taxes, as well as improving the ease of registration for businesses and eliminating bureaucratic barriers. Due to particularly low levels of trust in government, emphasis is placed on the