nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2011‒08‒15
nine papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. UNDECLARED WORK AND WAGE INEQUALITY By Leandro Elia; Edoardo Di Porto
  2. Brechas de ingresos laborales entre asalariados y autoempleados en el Perú By José Rodríguez
  4. International factor mobility, informal interest rate and capital market imperfection: a general equilibrium analysis By Chaudhuri, Sarbajit; Gupta, Manash Ranjan
  5. Does microfinance move the households toward self employment? By Khaleque, Abdul
  6. Potential implications of labour market opening in Germany and Austria on emigration from Poland By Strzelecki, Paweł; Wyszynski, Robert
  7. Transaction Costs and Cattle Farmers' Choice of Marketing Channels in North-Central Namibia By Shiimi, T.; Taljaard, Pieter R.; Jordaan, Henry
  8. Women Farmerâs and Agriculture Growth: Challenge and Perspective for Africa face the economic crisis By Adeniyi, Labintan
  9. Grain Distribution in Ghana under Imperfectly Competitive Market Conditions By Langyintuo, Augustine S.

  1. By: Leandro Elia; Edoardo Di Porto (Dipartimento di Economia e Statistica, Università della Calabria)
    Abstract: In this paper we study how undeclared work affects the wages of undeclared and declared workers and in particular the declared wage inequality. Using individual data on Italy in the years 2000-2004, we compute a cross and own labor demand elasticity for undeclared and declared work. We provide an identification strategy relying on Italian amnesty tax laws in 2002. Such laws have changed the shape of Italian undeclared sector causing a quick emersion of undeclared workers. Our results based on a set of 2SLS regressions suggest that undeclared work: 1) decreases declared wages, 2) adversely affects undeclared wages and 3) raises wage inequality in the declared sector. Undeclared work competes more with least skilled jobs, while do not affect high skilled jobs. We found complementarity between undeclared workers and medium skills jobs. As a consequence reducing undeclared work decreases wage inequality as well as it decreases the earnings in medium skill sectors. This result suggests that undertaking reducing undeclared labor-policy might encounter resistance because of welfare loss of the medium class of workers.
    Keywords: Elasticity of labor demand, Undeclared labor, Wage inequality
    JEL: H26 J23 J31
    Date: 2011–08
  2. By: José Rodríguez (Departamento de Economía - Pontificia Universidad Católica del Perú)
    Abstract: El objetivo principal del trabajo es someter a prueba la existencia de diferencias de los ingresos entre los trabajadores asalariados y los autoempleados en los mercados laborales del Perú. Para este fin se utiliza la información de las encuestas de hogares de los años 2008 y 2009, y se emplea métodos semi-paramétricos para hacer las comparaciones (propensity score matching y diferencia de las diferencias). Los resultados sugieren la existencia de segmentación entre estos dos tipos de puestos de trabajo (i.e. asalariados y autogenerados) pues los dos métodos empleados muestran diferencias en 22 y 31% con el método de las diferencias en las diferencias y entre 33 y 64% con el propensity score matching.
    Keywords: Perú, mercado de trabajo, segmentación laboral, diferencias de ingresos laborales
    JEL: J21 J31 J42
    Date: 2011
  3. By: Jesús Palomino Samaniego (Departamento de Economía - Pontificia Universidad Católica del Perú)
    Abstract: Following the studies of Jaramillo (2004), Céspedes (2006) and Del Valle (2009), the present research evaluates the short term effects of the increase of the minimum wage on employment and labour income in Lima Metropolitana. The contribution of the paper consists in modeling the labour market in three sectors: formal employment, “competitive” informal employment and “subsistence” informal employment. This will allow us to identify the differentiated effects of the minimum wage in the labour market. We propose that the increase in the minimum wage imposes a higher barrier to the demand of low skilled labour, expulsing these workers to subsistence activities in the informal sector, while employment in the “competitive” informal sector remains unaffected. Consequently, we expect a higher labour income in the formal sector, a lower labour income in the “subsistence” informal sector due to the increased competence, and no significant changes in the “competitive” informal sector. We design a stratified propensity score matching methodology for the empirical identification of the “competitive” and “subsistence” informal sectors, and follow Neumark (1994) for the impact assessment of the minimum wage. The results confirm the hypothesis about the effects on employment, but fail to confirm those about the effects on labour income.
    Keywords: Salario mínimo / Empleo / Ingresos laborales / Economía laboral / Informalidad
    JEL: J31 J38 O54
    Date: 2011
  4. By: Chaudhuri, Sarbajit; Gupta, Manash Ranjan
    Abstract: This paper makes a pioneering attempt to provide a theory of determination of interest rate in the informal credit market in a small open economy in terms of a three-sector general equilibrium model. There are two informal sectors which obtain production loans from a monopolistic moneylender and employ labour from the informal labour market. On the other hand, the formal sector employs labour at an institutionally fixed wage rate and takes loans from the competitive formal credit market. We show that an inflow of foreign capital and/or an emigration of labour raises (lowers) the informal (formal) interest rate while lowers the competitive wage rate in the informal labour market when the informal manufacturing sector is more capital-intensive vis-à-vis the agricultural informal sector. International factor mobility, therefore, increases the degrees of distortions in both the factor markets in this case.
    Keywords: Informal credit; formal credit; moneylender; foreign capital; emigration; general equilibrium
    JEL: F22 O17 F21 D42
    Date: 2011–08–08
  5. By: Khaleque, Abdul
    Abstract: The present study is based on 5208 observations, which is comprised of participant households of microcredit programs, non-participant households of program villages as well as non-participant households from control villages. We found that among the participant households 37% depend on wage as well as self employment activity and 20% is solely dependent on self-employment activity and the remaining depends on dual activity (self-employment as well as wage employment), but among the non-participant households 60% is solely dependent on day labor activity. To find the link between occupation selection and microfinance participation, we use simple as well as multiple regression models like logit, multinomial logit, seemingly unrelated regression, etc. The regression results based on earnings from the elective occupations or number of days worked in that occupation suggests that the surveyed participant households have higher likelihood of being self-employed or to maintain self-employment as well as wage employment at a time to increase their welfare. The shifters due to relaxation of credit constraint or proliferation of access to credit moves toward sole self-employment activity with higher likelihood than the dual activity – to be employed in self-employment as well as wage employment within a given time span. In compendium, we can lucidly claim from this paper that beyond the asset structure of the households such as landholdings, savings, education, etc., the microfinance directly induces self-employment activity or transfer available working days from the day labor activity to self-employment activity and maximize their economic gain such as higher income, savings etc.
    Keywords: Credit; Self-employment; Logit; Multinomial logit; Seemingly Unrelated Model
    JEL: E24 J22 J24 J23
    Date: 2011–07
  6. By: Strzelecki, Paweł; Wyszynski, Robert
    Abstract: The aim of this study is to present the characteristic of present-day migrants and the potential for possible migration after the opening of the labour markets in Austria and Germany. The econometric analysis shows that differences in unemployment rates between sending and receiving countries were the most important for changes in the emigration from Poland in the period 2002-2009. Mostly due to persistence of these differences the intruduction of the open-door policy by two last EU countries in the spring of 2011 can intensify the further emigration flows from Poland. Data concerning the structure of the present emigration in Germany indicate that emigrants from Poland are mainly persons with vocational and secondary education, working primarily in the sections of services (e.g. health care and social assistance, accommodation and catering). There is also a relatively high percentage of persons employed in agriculture and the construction sector. These sectors will probably continue to be the most frequent workplace for emigrants, where the internal supply of work seems insufficient to meet the needs of this part of the German economy. The current limitations push better educated emigrants from Poland to work mainly as specialists in the sectors of economy preferred by Germany or as self-employed persons. The caps applied by German authorities concerning the number of Polish employees on secondment under the framework of the cross-border provision of services remain underused. Moreover, German data (which do not cover persons holding dual nationality) indicate that for the time being emigration from Poland is, to a large extent, circulatory by nature. Examples of other EU countries which already opened their labour markets indicate that the removal of barriers to access may increase emigration in the first year, but the differences and changes in unemployment rates among countries are a much more important factor for migratory flows, particularly at a later stage. The opening of labour markets in Germany and Austria may contribute to a change in the nature of the present short-term to a more permanent migration from Poland. The first part of the study presents information on the existing work limitations for Poles in Germany and the characteristics of the present emigrants from Poland to Germany and Austria. The second part discusses determinants of emigration in 2002-2009, putting a special emphasis on those countries which already managed to open their labour markets for the ‘new’ EU members. The third part delivers the estimates of possible emigration changes from Poland to Germany and Austria that are going to happen after 1 May 2011.
    Keywords: labour migration; open-door policy; Poland; Germany; determinants of migration
    JEL: F22 J61
    Date: 2011–04
  7. By: Shiimi, T.; Taljaard, Pieter R.; Jordaan, Henry
    Abstract: About 70% of the Namibian population depends on agricultural activities for their livelihood. Moreover, agriculture remains an important sector to Namibia because its national economy is widely dependent on agricultural production. Cattle producers in the Northern Communal Areas (NCAs) have an option to market their cattle via the formal or informal markets. Efforts have been made to encourage producers to market their cattle through the formal market; however, limited improvement has been observed. In this study a number of factors have been analysed to determine its influences on cattle marketing decisions. Factors influencing the marketing decision of whether or not to sell through the formal market are analysed using the Probit model. Factors influencing the proportion of cattle sold through the formal market on condition that a producer uses the formal markets to sell cattle are analysed with the Truncated model. Testing the Tobit model against the alternative of a two-part model is done using Craggâs model. Empirical results revealed that problems with transport to MeatCo, improved productivity, accessibility to market-related information and access to new information technology, are some factors significantly affecting the decision of whether or not to sell through the formal market. Payment arrangements by MeatCo, animal handling, accessibility to new information technology, age of respondents and lack of access to marketing expertise, are some factors influencing the proportional number of cattle sold through the formal market. The results suggest that substantially more information is obtained by modelling cattle marketing behaviour as a two decision-making instead of a single decision-making framework.
    Keywords: Cattle marketing, decision-making, formal markets, transaction costs, Livestock Production/Industries,
    Date: 2010–09
  8. By: Adeniyi, Labintan
    Abstract: In poor countries the agricultural sector is essential to growth, poverty reduction, and food security. In Sub- Saharan Africa, the agricultural sector employs 65 percent of the labor force and generates 32 per cent of GDP growth (Christian Friis Bach and all, 2008).More than half of rural employment in Sub- Saharan Africa consists of self-employed farmers, many of whom are women. Women generally own less land and the land they have is often of lower quality than the land owned by men. According to the International Development Research Centre, women in Africa only own 1 per cent of the land. Women have to contend with limited access to financial and technical resources. Women lack political influence. However the recent economic crisis that has affected the food crisis may have considerable consequences on African rural women who are mostly vulnerable in African society and may increase some challenges that can limited the African agriculture growth as women is the heart of this sector in Africa even if most of politic donât consider them in the policies. This paper is to evaluate the major effect of this crisis on this vulnerable group In Africa and define some perspective that policies maker could use for Africa Agriculture sustainable growth.. The Descriptive analysis show that the economic crisis has increase in gender inequality in agriculture sector, increase women financial credit access lack, women farmer migration, women farmer income reduction, women land access facilities reduction and their health problem has also increase. It is clear that to solve the economic crisis impact on African agriculture for sustainable growth, policies maker should include more policies which should consider women farmers. Research also should focus more on women vulnerability in agriculture face the economic crisis.
    Keywords: Women Farmer-Africa- Economic Crisis-Challenge and Perspective, International Development, Labor and Human Capital,
    Date: 2010–09
  9. By: Langyintuo, Augustine S.
    Abstract: Interspatial and intertemporal grain distribution in Ghana is a private sector activity carried out mainly by traders. These traders sometimes collude to maximize their joint profits. By so doing they influence the conduct of the grains market. To examine the effect of their actions on the informal maize market in Ghana, a spatial equilibrium model was estimated under three scenarios: (1) Perfect competition, (2) Cournot-Narsh conjectures, and (3) Collusion. The results indicate that imperfect competition distorts grain flows, reduces consumer welfare and depresses tradersâ sales revenue. Collusive behavior of traders, on the other hand, causes the greatest distortion of grain flows as well as trader and consumer welfare. These results draw attention to policy makers and development agents to educate traders against using their associations to foster collusion.
    Keywords: Spatial equilibrium, monopoly, imperfect competition, interspatial, Cournot- Narsh conjectures, Crop Production/Industries, D4, L1,
    Date: 2010–09

This nep-iue issue is ©2011 by Catalina Granda Carvajal. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.