nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2012‒09‒16
five papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Wages and Informality in Developing Countries By Costas Meghir; Renata Narita; Jean-Marc Robin
  2. Poor Institutions, Rich Mines: Resource Curse and the Origins of the Sicilian Mafia By P. Buonanno; R. Durante; G. Prarolo; P. Vanin
  3. Loan regulation and child labor in rural India By Basab Dasgupta; Christian Zimmermann
  4. Rangel : ciclos longos e dualidade By Bresser-Pereira, Luiz Carlos
  5. Bargaining over Tax Information Exchange By May Elsayyad

  1. By: Costas Meghir (Cowles Foundation, Yale University); Renata Narita (World Bank); Jean-Marc Robin (Dept. of Economics, Sciences Po)
    Abstract: It is often argued that informal labor markets in developing countries promote growth by reducing the impact of regulation. On the other hand informality may reduce the amount of social protection offered to workers. We extend the wage-posting framework of Burdett and Mortensen (1998) to allow heterogeneous firms to decide whether to locate in the formal or the informal sector, as well as set wages. Workers engage in both off the job and on the job search. We estimate the model using Brazilian micro data and evaluate the labor market and welfare effects of policies towards informality.
    Keywords: Informality, Unemployment, Job search, Wage posting, Equilibrium wage distributions, On the job search, Method of moments
    JEL: J24 J3 J42 J6 O17
    Date: 2012–09
  2. By: P. Buonanno; R. Durante; G. Prarolo; P. Vanin
    Abstract: This study explains the emergence of the Sicilian mafia in the XIX century as the product of the interaction between natural resource abundance and weak institutions. We advance the hypothesis that the mafia emerged after the collapse of the Bourbon Kingdom in a context characterized by a severe lack of state property-right enforcement in response to the rising demand for the protection of sulfur - Sicily's most valuable export commodity - whose demand in the international markets was soaring at the time. We test this hypothesis combining data on the early presence of the mafia and on the distribution of sulfur reserves across Sicilian municipalities and find evidence of a positive and significant effect of sulphur availability on mafia's diffusion. These results remain unchanged when including department fixed-effects and various geographical and historical controls, when controlling for spatial correlation, and when comparing pairs of neighboring municipalities with and without sulfur.
    JEL: K42 N33 N54 O13 O43
    Date: 2012–09
  3. By: Basab Dasgupta; Christian Zimmermann
    Abstract: We study the impact of loan regulation in rural India on child labor with an overlapping-generations model of formal and informal lending, human capital accumulation, adverse selection, and differentiated risk types. Specifically, we build a model economy that replicates the current outcome with a loan rate cap and no lender discrimination by risk using a survey of rural lenders. Households borrow primarily from informal moneylenders and use child labor. Removing the rate cap and allowing lender discrimination markedly increases capital use, eliminates child labor, and improves welfare of all household types.
    Keywords: Loans ; Child labor ; India
    Date: 2012
  4. By: Bresser-Pereira, Luiz Carlos
    Abstract: For Ignácio Rangel economic development is an intrinsically contradictory movement through which technological innovation, whose dynamics explains the long cycle, is permanently in conflict with the existing capitals that it depreciates. Development in Brazil is not just defined by the opposition between the capitalist and the pre-capitalist sector; there is also an external duality that does not just express the relation between its stages of economic growth and the development of the world economy, but also tells us how its modern and its backward sector change at each stage. The duality has a double character: through the coexistence of relations of productions that correspond to two sequential historical phases, and through the existence, in the domestic and in the external “pole” of such duality, a relation of dependency toward the more advanced societies.
    Date: 2012–08–30
  5. By: May Elsayyad
    Abstract: This paper empirically studies recent treaty signings between tax havens and OECD countries as the outcome of a bargaining process over treaty form. Havens can decide not to sign an agreement, to sign a tax information exchange agreement or to sign a double taxation convention. We use a highly stylized bargaining model to develop testable hypotheses with regards to the type of agreement signed. We show that the main determinants of treaty signing are a haven's bargaining power and good governance. We show that it is easier to renegotiate an already existent treaty to include information exchange than to pressure countries with no existent agreement.
    Date: 2012–02

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