Abstract
Informal economy is rather difficult to define and demarcate in the methodological context. International Conference of Labour Statisticians in 2003 adopted a set of guidelines regarding definition of statistical categories of informal employment. These include for example employed unregistered own-account workers, contributing family workers, persons who work based on oral agreement, etc. Informal economy is a contentious topic in many developing countries as it brings about many elements that from several aspects adversely affect the development. The most commonly stressed are the fiscal implications (associated with tax revenue loss) and some social concerns. However, in some parts of the world informal sector went from being considered as a negative occurrence to be tolerated as a partial solution to some of the challenges that hinder development of rural regions and communities. The aim of the paper is to determine the relationship between informal economy and level of development and quality of life in Ukrainian regions. The paper examines the role of informal economy in regional structure of Ukraine, while confronting the findings with regional divergence in relevant indicators of development and quality of life. There are statistically significant differences in the size of the informal employment among different types of Ukrainian regions (by rural-urban typology). With increasing share of informal employment in the regions, the income level of households decreases significantly even when we take into consideration the level of unemployment.