nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2013‒10‒02
fifteen papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Informal Employment in Russia: Incidence, Determinants and Labor Market Segmentation By H. Lehmann; A. Zaiceva
  2. Trade, informal employment and labor adjustment costs By Arias, Javier; Artuc, Erhan; Lederman, Daniel; Rojas, Diego
  3. Has Atypical Work Become Typical in Germany? By Eichhorst, Werner; Tobsch, Verena
  4. Female business ownership and informal sector persistence By Ghani, Ejaz; Kerr, William R.; O'Connell, Stephen D.
  5. Tourism overview: changing end markets and hyper competition By Michelle Christian; Dev Nathan
  6. New strategies of industrial organization: outsourcing and consolidation in the mobile telecom sector in India By Sumangala Damodaran
  7. How do financial reforms affect inequality through financial sector competition? Evidence from Africa By Asongu Simplice
  8. Microfinance and moneylenders : long-run effects of MFIs on informal credit market in Bangladesh By Berg, Claudia; Emran, M. Shahe; Shilpi, Forhad
  9. Finance and Growth for Microenterprises: Evidence from Rural China By Beck, T.H.L.; Lu, L.; Yang, R.
  10. Coagglomeration of formal and informal industry : evidence from India By Mukim, Megha
  11. Transmission Intergénérationelle de l’Entrepreneuriat et Performance des Unités de Production Informelles au Cameroun By Mboutchouang, Vincent De Paul; Kenneck, Joseph Massil; Mbenga Bindop, Kunz Modeste
  12. Audits and tax offenders: recent evidence from Greece By Athanasios O. Tagkalakis
  13. The impact of mobile phone penetration on African inequality By Asongu Simplice
  14. Global dynamic timelines for IPRs harmonization against software piracy By Asongu Simplice; Antonio R. Andrés
  15. Piracy as an ethical decision By Martyna Kobus; Michał Krawczyk

  1. By: H. Lehmann; A. Zaiceva
    Abstract: This paper takes stock of informal employment in Russia analyzing its incidence and determinants. Using the regular waves and an informality supplement of the Russian Longitudinal Monitoring Survey (RLMS) it develops several measures of informal employment and demonstrates that the incidence varies widely across the different definitions. We also show that the determinants of informal employment are roughly stable across the different measures: workers who are males, relatively young, unskilled and employed in construction and trade and related services have a higher likelihood to have an informal job. We also take a look at the issue of labor market segmentation along the informal-formal divide by estimating an informal-formal wage gap at the means and across the entire wage distributions. We find only weak evidence for labor market segmentation in Russia when estimating an informal-formal wage gap for salaried workers at the mean. The results of quantile regressions show a wage penalty in the lower half of the distribution and no gap in the upper half for informal employees. In contrast, informal self-employed and entrepreneurs have conditional mean wages that are higher than the mean wages for the formally employed. Across the entire wage distribution, however, we find a negative wage gap in the lowest quartile and a strongly positive wage gap in the highest quartile, pointing to a segmented informal sector with a lower free entry tier and an upper rationed tier.
    JEL: J31 J40 P23
    Date: 2013–09
  2. By: Arias, Javier; Artuc, Erhan; Lederman, Daniel; Rojas, Diego
    Abstract: Informal employment is ubiquitous in developing countries, but few studies have estimated workers'switching costs between informal and formal employment. This paper builds on the empirical literature grounded in discrete choice models to estimate these costs. The results suggest that inter-industry labor mobility costs are large, but entry costs into informal employment are significantly lower than the costs of entry in formal employment. Simulations of labor-market adjustments caused by a trade-related fall in manufacturing goods prices indicate that the share of informally employed workers rises after liberalization, but this is due to entry into the labor market by previously idle labor.
    Keywords: Labor Markets,Labor Policies,Economic Theory&Research,Work&Working Conditions,Labor Standards
    Date: 2013–09–01
  3. By: Eichhorst, Werner (IZA); Tobsch, Verena (E-x-AKT WIRTSCHAFTSFORSCHUNG)
    Abstract: This paper gives an overview of the transformation of the German labor market since the mid-1990s with a special focus on the changing patterns of labor market segmentation or 'dualization' of employment in Germany. While labor market duality in Germany can partially be attributed to labor market reforms promoting in particular non-standard forms of employment and allowing for an expansion of low pay, structural changes in the economy as well as strategic choices by employers and social partners also play a prominent role.
    Keywords: Germany, non-standard work, low pay, labor market segmentation
    JEL: J21 J31 J58
    Date: 2013–09
  4. By: Ghani, Ejaz; Kerr, William R.; O'Connell, Stephen D.
    Abstract: The informal sector in India has been exceptionally persistent over the past two decades. Is this a bad thing? Not necessarily. This paper shows that a substantial share of the persistence in India's unorganized manufacturing sector is due to the rapid increase in female-owned businesses. Had women's participation remained in the proportion to male-owned businesses that was evident in 1994, the unorganized manufacturing sector would have declined in share rather than increased. Most of these new female-owned businesses are opened in the household and at a small scale, about a third of the size of a typical male-owned business in the informal sector. Yet, it appears that these businesses offer economic opportunities not otherwise present and a transition for some women from unpaid domestic work.
    Keywords: E-Business,Banks&Banking Reform,Population Policies,Housing&Human Habitats,Gender and Health
    Date: 2013–09–01
  5. By: Michelle Christian; Dev Nathan
    Abstract: Abstract This overview of tourism research conducted by Capturing the Gains covers cases from Asia (China, Indonesia and India), and Africa (Kenya, South Africa and Uganda). The tourism value chain is outlined and changes in the relative roles of different agencies discussed. The paper analyses the changes in the composition of tourists in these countries and the resultant change in relative importance of national and international tour agencies. Our findings suggest that benefits from the growth of tourism are unevenly distributed, with the oligopolistic nature of the tour agencies and hyper-competition among service providers even resulting in some cases of below-cost provision of destination services. These commercial value chain dynamics have led to precarious employment arrangements. There is a synthesis of the nature of employment in tourism, with a large presence of own-account and other forms of informal employment. Ways of dealing with the oligopolistic buyers’ market are discussed, including branding and organization by destination service providers. Methods of improving the gains of women and other workers are also addressed, such as the role of workers’ organization and state-supported social security measures.
    Date: 2013
  6. By: Sumangala Damodaran
    Abstract: Abstract The paper discusses the experience of the mobile telecom sector in India in terms of its business organization. There is a high level of outsourcing of activities, including those such as network management, which would usually be included within the core competence of mobile telecom companies. This outsourcing strategy, pioneered by Bharti Airtel, has resulted in considerable cost savings and increased profits for a small number of core employees of the lead firm. At the same time, in some outsourced activities, such as tower construction, there is a large incidence of casual and contract labour, all forms of precarious employment of the informal variety. However, because of the high level of oligopolistic competition among mobile telecom service providers, some of the benefits of lower cost have been passed on to consumers in the form of low-cost services. But the Bharti Airtel outsourcing strategy is important in pushing the limits of what could be called core competence in a business model dominated by outsourcing.
    Date: 2013
  7. By: Asongu Simplice (Yaoundé/Cameroun)
    Abstract: In the first empirical study on how financial reforms have been instrumental in mitigating inequality through financial sector competition, we contribute at the same time to the macroeconomic literature on measuring financial development and respond to the growing field of economic development by means of informal sector promotion. Hitherto, unexplored financial sector concepts of formalization, semi-formalization and informalization are introduced. Four main findings are established: (1) while formal financial development decreases inequality, financial sector formalization increases it; (2) whereas semi-formal financial development increases inequality, the effect of financial semi-formalization is unclear; (3) both informal financial development and financial informalization have an income equalizing effect and; (4) non-formal financial development is pro-poor. Policy implications are discussed.
    Keywords: Financial Development; Shadow Economy; Poverty; Inequality; Africa
    JEL: E00 G20 I30 O17 O55
    Date: 2013–01–01
  8. By: Berg, Claudia; Emran, M. Shahe; Shilpi, Forhad
    Abstract: Using two surveys from Bangladesh, this paper provides evidence on the effects of microfinance competition on village moneylender interest rates and households'dependence on informal credit. The views among practitioners diverge sharply: proponents claim that competition of microfinance institutions reduces both the moneylender interest rate and households'reliance on informal credit, while the critics argue the opposite. Taking advantage of recent econometric approaches that address selection on unobservables without imposing standard exclusion restrictions, this paper finds that microfinance competition does not reduce moneylender interest rates, thus partially repudiating the proponents. The effects are heterogeneous; there is no perceptible effect at low levels of coverage, but when microfinance coverage is high enough, the moneylender interest rate increases significantly. In contrast, households'dependence on informal credit tends to go down after they become a member of a microfinance institution, which contradicts part of the critic's argument. The evidence is consistent with a model where microfinance institutions draw away better borrowers from the moneylender, and fixed costs are important in informal lending.
    Keywords: Access to Finance,Debt Markets,Banks&Banking Reform,Economic Theory&Research,Emerging Markets
    Date: 2013–09–01
  9. By: Beck, T.H.L.; Lu, L.; Yang, R. (Tilburg University, Center for Economic Research)
    Abstract: Abstract: Using a survey dataset of Chinese rural households, we find that access to external finance is positively associated with the decision to become entrepreneur, the initial investment for microenterprises and the use of external finance. Also, we find that the use of informal finance is positively associated with sales growth of microenterprises with employees, but not of self-employed. We do not find any significant relationship between the use of formal finance and firm growth. Our findings underline the importance of finance for entrepreneurship and microenterprise growth, and the role of informal finance in the absence of efficient formal financial institutions.
    Keywords: Finance;Entrepreneurship;Growth;China.
    JEL: L26 G21
    Date: 2013
  10. By: Mukim, Megha
    Abstract: A large and growing informal sector is a major feature of developing countries. This paper analyzes coagglomeration patterns between formal and informal manufacturing enterprises in India. It studies (a) the causes underlying these patterns and (b) the positive externalities, if any, on the entry of new firms. The analysis finds that buyer-supplier and technology linkages explain much of formal-informal coagglomeration. Also, within-industry coagglomeration matters mostly to small- and medium-sized formal firm births. Traditional measures of agglomeration remain important in explaining new industrial activity, whether in the formal or the informal sector.
    Keywords: Microfinance,Water and Industry,Small Scale Enterprise,E-Business,Industrial Management
    Date: 2013–09–01
  11. By: Mboutchouang, Vincent De Paul; Kenneck, Joseph Massil; Mbenga Bindop, Kunz Modeste
    Abstract: This study aims to contribute to the debate on the determinants of the informal firms’ outcomes by focusing on the potential influence that the family background can have on informal business outcomes in Cameroon. Using data from the Survey on Employment and the Informal Sector (SESI 2) in Cameroun, this study shows that children of self-employed father and/or mother have a better value added, sales in some cases, than entrepreneur that parents does not have this status. This comparative advantage is strengthened when the transmission is between a father and his son or when the child, regardless of gender, is engaged in the same branch of activity as his parent(s). This transmission consists of the dissemination of a stock of human capital in the form of specific skills. Résumé Cette étude vise à contribuer au débat sur les résultats des entreprises du secteur informel en se focalisant sur l’éventuel influence que peut avoir l’environnement familial sur la performance d’une firme. A partir, des données de l’Enquête sur l’Emploi et le Secteur Informel au Cameroun (EESI 2), l’étude montre que les individus ayant eu un père et/ou une mère entrepreneurs réalisent une valeur ajoutée et des ventes, plus importantes que les entrepreneurs descendants de parents n’ayant pas ce statut. Cet avantage comparatif se renforce lorsque la transmission s’établit entre le père et son fils ou lorsque l’enfant, indépendamment du genre, s’engage à son compte propre dans la même branche d’activité que son père et/ou sa mère. Cette transmission consiste principalement à une diffusion d’un stock de capital humain sous forme de compétences spécifiques.
    Keywords: Intergenerational transmission, second-generation entrepreneur, informal firm, business outcomes
    JEL: J24 L26
    Date: 2013–02
  12. By: Athanasios O. Tagkalakis (Bank of Greece)
    Abstract: Using a novel dataset on summer 2012 tax inspections by the Hellenic Ministry of Finance in tourist and high economic activity areas in 13 regions in Greece we found that the intensification of tax audits can induce tax compliance. This finding is very important at the current juncture for Greece as it shows that improvement in tax administration and tax enforcement mechanisms can deter tax evasion, increase tax revenues and contribute to the on-going fiscal consolidation effort.
    Keywords: taxation; audit; compliance.
    JEL: H26 E26 K42
    Date: 2013–02
  13. By: Asongu Simplice (Yaoundé/Cameroun)
    Abstract: Purpose – The aim of this paper is to complement theoretical and qualitative literature with empirical evidence on the income-redistributive effect of mobile phone penetration in 52 African countries. Design/methodology/approach – Robust Ordinary Least Squares and Two Stage Least Squares empirical strategies are employed. Findings – The findings suggest that mobile penetration is pro-poor, as it has a positive income equality effect. Social implications – ‘Mobile phone’-oriented poverty reduction channels are discussed. Originality/value – It deviates from mainstream country-specific and microeconomic survey-based approaches in the literature and provides the first macroeconomic assessment of the ‘mobile phone’-inequality nexus.
    Keywords: Mobile Phones; Shadow Economy; Poverty; Inequality; Africa
    JEL: E00 G20 I30 L96 O33
    Date: 2013–04–14
  14. By: Asongu Simplice (Yaoundé/Cameroun); Antonio R. Andrés (Ifrane, Morocco)
    Abstract: This paper employs a recent methodological innovation on intellectual property rights (IPRs) harmonization to project global timelines for common policies against software piracy. The findings on 99 countries are premised on 15 fundamental characteristics of software piracy based on income-levels (high-income, lower-middle-income, upper-middle-income and low-income), legal-origins (English common-law, French civil-law, German civil-law and, Scandinavian civil-law) and, regional proximity (South Asia, Europe & Central Asia, East Asia & the Pacific, Middle East & North Africa, Latin America & the Caribbean and, Sub-Saharan Africa). The results broadly show that a feasible horizon for the harmonization of blanket policies ranges from 4 to 10 years.
    Keywords: Software piracy; Intellectual property rights; Panel data; Convergence
    JEL: F42 K42 O34 O38 O57
    Date: 2013–03–14
  15. By: Martyna Kobus (Faculty of Economic Sciences, University of Warsaw); Michał Krawczyk (Faculty of Economic Sciences, University of Warsaw)
    Abstract: We consider a monopolist producer of information goods that may be subject to unauthorized copying. The key feature of our model is that we allow consumers to have ethical concerns based on equity theory that may reduce their utility of such a copy. We derive the formulas describing demand for the product. We find that piracy reduces prices and producers' profit, an effect that can be limited by such measures as copyright enforcement (proxied by expected value of punishment for piracy) and anti-piracy campaigns. Welfare effects are also analyzed and generally turn out to be ambiguous.
    Keywords: digital piracy, copyright protection, equity theory
    JEL: D42 K42
    Date: 2013

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