nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2013‒06‒04
six papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Structural Change, Wage Formation and Economic Growth in Low-Income Countries By Bender, Dieter
  2. Social Protection for the Informal Sector and the Informally Employed in Vietnam: Literature and data review By Nguyen Thi Lan Huong; Luu Quan Tuan; Meissner, Matthias; Bui Sy Tuan; Dang Do Quyen; Nguyen Hai Yen
  3. Constrained gazelles : high potentials in West Africa's informal economy By Grimm, Michael; Knorringa, Peter; Lay, Jann
  4. The exceptional persistence of India's unorganized sector By Ghani, Ejaz; Kerr, William R.; O'Connell, Stephen D.
  5. A Helping Hand or the Long Arm of the Law? Experimental Evidence on What Governments Can Do to Formalize Firms By de Andrade, Gustavo Henrique; Bruhn, Miriam; McKenzie, David
  6. Impactos de Bem-Estar de Mudanças no Mercado de Serviços Domésticos Brasileiro By Edson Paulo Domingues; Kênia Barreiro de Souza

  1. By: Bender, Dieter
    Abstract: This paper analyzes the effects of structural change on the rates of growth of wages, employment and per-capita income in low-income countries, their dualistic structure shown by a Lewis-type two-sector model. Structural change is measured by the varying shares of sectoral employment in total employment. It is shown that the growth rates of GDP and per-capita income can be formulated as functions of these sectoral employment shares. Distinguishing the phases of dualistic development with and without labour surplus and post-dualistic development, it is demonstrated that each of these stages exhibits different growth dynamics: high but falling growth rates under dualistic development with labour surplus, low but rising growth rates under dualistic development after absorption of the labour surplus, growth rates falling again and converging toward a higher income steady state in the post-dual economy. As the growth dynamics of dualistic development are explained by a modified Lewis model and those of post-dualistic development by the Solow model, the study also highlights the complementary roles both models are playing in development economics.
    Keywords: Economic growth; Dualistic development; Labour surplus; Rural-urban migration
    JEL: O11 O41
    Date: 2012
  2. By: Nguyen Thi Lan Huong (Institute of Labour Science and Social Affairs (ILSSA), Hanoi, Vietnam); Luu Quan Tuan (Institute of Labour Science and Social Affairs (ILSSA), Hanoi, Vietnam); Meissner, Matthias; Bui Sy Tuan; Dang Do Quyen; Nguyen Hai Yen
    Abstract: In the last 20 years, Vietnam has been one of the fastest growing economies in Asia. But the coverage of social insurance is still low. Only around one in five workers is covered by the public social insurance scheme. Expanding the coverage of social insurance for informal sector workers and the informally employed is a key policy area as the role of traditional and informal security systems tends to get weaker. This paper provides a comprehensive literature and data review regarding informal sector research in Vietnam. Furthermore, it reflects the international understanding of the terms social protection, informal sector und informal employment. The impact of the informal sector on social protection and socio-economic development in Vietnam is evident. Nevertheless, in research, literature and data the picture is rather fragmented which indicates the necessity for further efforts.
    Keywords: Social protection; Social security; Social insurance; Informal sector; Informal economy; Literature review; Labour market; Social development; Vietnam
    Date: 2013
  3. By: Grimm, Michael; Knorringa, Peter; Lay, Jann
    Abstract: The informal sector is typically characterized as being very heterogeneous and possibly composed of two clearly distinct segments, sometimes called the lower and upper tier. However, empirical evidence shows that even among lower tier entrepreneur's profitability can be quite high. The authors combine these findings and develop an innovative approach to identify what is called constrained gazelles, next to the well-known survivalists in the lower tier and growth-oriented top-performers in the upper tier. The sample of informal entrepreneurs in seven West-African countries allows linking the relative size of these three groups to the structural and macroeconomic environment in these countries.
    Keywords: Access to Finance,Economic Theory&Research,Microfinance,Financial Literacy,Environmental Economics&Policies
    Date: 2012–03–01
  4. By: Ghani, Ejaz; Kerr, William R.; O'Connell, Stephen D.
    Abstract: The transformation of India's unorganized sector is important to its modernization, growth, and attainment of regional economic equality. This paper documents several key facts about India's unorganized sector in manufacturing and services. First, the unorganized sector is large, accounting for more than 99 percent of establishments and 80 percent of employment in manufacturing. Second, the unorganized sector is stubbornly persistent -- it accounted for 81 percent of manufacturing employment in 1989 and 2005. Third, this persistence is not due to particular subsets of industries or states, as most industries and states show limited change in unorganized sector employment shares. Fourth, the degree to which localized unorganized activity exists is important as it is associated with weaker production functions for manufacturing firms. Building from these facts, the paper investigates conditions promoting transformation by state-industry. Decomposition exercises find that both within and between adjustments for state-industries weakly reduce unorganized sector shares. The aggregate persistence instead comes from the covariance term, where fast-growing state-industries witness rising unorganized sector activity. Regressions quantify that growth in the organized sector by state-industry reduces the unorganized sector employment share, but only marginally reduces employment levels in unorganized activity. Analysis of the establishment size distribution highlights that entrepreneurship and larger organized sector plants are most important for transitions in the manufacturing sector, while small establishments play a key role in the services sector.
    Keywords: Labor Markets,Labor Policies,Water and Industry,Tertiary Education,E-Business
    Date: 2013–05–01
  5. By: de Andrade, Gustavo Henrique (Governo do Estado de Minas Gerais); Bruhn, Miriam (World Bank); McKenzie, David (World Bank)
    Abstract: Many governments have spent much of the past decade trying to extend a helping hand to informal businesses by making it easier and cheaper for them to formalize. Much less effort has been devoted to raising the costs of remaining informal, through increasing enforcement of existing regulations. We conducted a field experiment in Belo Horizonte, Brazil, in order to test which government actions work in getting informal firms to register. Firms were randomized to a control group or one of four treatment groups: the first received information about how to formalize; the second received this information and free registration costs along with the use of an accountant for a year; the third group was assigned to receive an enforcement visit from a municipal inspector; while the fourth group was assigned to have a neighboring firm receive an enforcement visit to see if enforcement has spillovers. We find zero or negative impacts of information and free cost treatments, and a significant but small increase in formalization from inspections. Our LATE estimates of the impact of actually receiving an inspection are much bigger, giving a 21 to 27 percentage point increase in the likelihood of formalizing. The results show most informal firms won't formalize unless forced to do so, suggesting formality offers little private benefit to them, but the tax revenue benefits to the governments of bringing firms of this size into the formal system more than offset the costs of inspections.
    Keywords: informality, enforcement, small enterprises
    JEL: O17 O12 C93 D21 L26
    Date: 2013–05
  6. By: Edson Paulo Domingues (Cedeplar, Department of Economics, Universidade Federal de Minas Gerais); Kênia Barreiro de Souza (Cedeplar, Department of Economics, Universidade Federal de Minas Gerais)
    Abstract: O trabalho doméstico compreende uma série de atividades, como: limpeza; arrumação; cozinha; cuidados com o vestuário; cuidados com crianças, idosos, pessoas com deficiência, animais; entre outras. Embora podendo desempenhar atividades distintas, duas características são comuns a esses trabalhadores: o trabalho é remunerado e realizado em domicílio que não o do próprio trabalhador (OIT, 2011a; OIT, 2011b). Por essas e outras características socioeconômicas, o grupo de trabalhadores domésticos remunerados possui uma série de peculiaridades, entre as quais se destacam: i) predominam trabalhadoras do sexo feminino; ii) são pagos baixos salários; iii) o empregador é uma pessoa física; iv) a legislação não acompanha a Consolidação das Leis do Trabalho (CLT), sendo até mesmo colocada como exceção os direitos trabalhistas pela própria Constituição Federal (CF); e v) há alto índice de informalidade (OIT, 2011c; IBGE, 2012a)...
    Keywords: Impactos de Bem-Estar de Mudanças no Mercado de Serviços Domésticos Brasileiro
    Date: 2013–04

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