nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2014‒10‒03
seven papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Formal and Informal Sector Wage Differences in Transition Economies: Evidence from Tajikistan By Petr Huber; Ulugbek Rahimov
  2. The Effect of Informal Employment and Corruption on Income Levels in Brazil By Jamie Bologna
  3. Defining And Measuring Informality In The Turkish Labor Market By Elif Öznur ACAR; Aysit Tansel
  4. Labour markets for irrigated agriculture in central Ethiopia: Wage premiums and segmentation By Mengistu Assefa Wendimu; Peter Gibbon
  5. Innovation and copyright infringement: The Case of Commercial Piracy and End-user Piracy By Dyuti Banerjee; Sougata Poddar
  6. Corrupción, desigualdad y evasión de impuestos By Elvio Accinelli; Edgar J. Sánchez Carrera
  7. La economia informal y las restricciones que impone sobre las cotizaciones al regimen de pensiones en America Latina By David Tuesta

  1. By: Petr Huber (Austrian Institute for Economic Research (WIFO), Arsenal, Objekt 20, 1030 Wien and Faculty of Business and Economics, Mendel University in Brno.); Ulugbek Rahimov (Faculty of Economics, Westminster International University in Tashkent)
    Abstract: Analyzing the self-selection of workers into formal and informal sector employment in Tajikistan, a poor transition economy, with higher informal sector than formal sector wages and an informal sector employment share exceeding 50 percent, we find that the selection of formal and informal sector workers is based on comparative advantages rather that labor market segmentation. Furthermore, labor supply to the two sectors reacts rather elastically to relative wages. Policies increasing relative wages in the formal sector could thus be effective in reducing the high informal sector employment share in this country.
    Keywords: formal/informal sector wages, self selection, segmentation
    JEL: J31 J42 J21
    Date: 2014–09
  2. By: Jamie Bologna (West Virginia University, College of Business and Economics)
    Abstract: This paper exploits a unique dataset on corruption and informal sector employment in 476 Brazilian municipalities to estimate whether corruption impacts GDP or income levels once variation in informal economic activity is taken into account. Overall, I find that higher levels of corruption and a larger informal economy are generally associated with poor economic outcomes. However, only the size of the informal economy has a statistically significant effect. This effect is robust to the inclusion of a variety of controls and fixed effects, as well as an instrumental variable analysis. Further, these effects are large in magnitude. For example, a one standard deviation increase in the share of total employees that are informally employed explains a decrease in GDP per-capita of about 18 percent.
    Keywords: corruption, informal economy, income levels, growth
    JEL: D73 O17 O43
    Date: 2014–09
  3. By: Elif Öznur ACAR (Department of Banking and Finance, Cankaya University, Turkey); Aysit Tansel (Middle East Technical University, Ankara, Turkey)
    Abstract: This paper investigates how informality can be defined and measured in the Turkish labor market. Two alternative definitions of informality are used to explore their relevance and implications for the Turkish labor market using descriptive statistics. They are the enterprise definition and the social security definition. Further, contributions of individual and job characteristics to the likelihood of informality are investigated using multivariate probit analysis under the two definitions. The social security registration criterion is found to be a better measure of informality in the Turkish labor market given its ability to capture the key relationships between several individual and employment characteristics and the likelihood of informality.The study suggests that preference should be given to social security definition of labor informality for a more accurate depiction of the Turkish labor market. The suitability of the two alternative definitions of informality in the Turkish labor market and its implications have not been investigated before.
    Date: 2014
  4. By: Mengistu Assefa Wendimu (Danish Institute for International Studies (DIIS), Natural Resources and Development; Department of Food and Resource Economics, University of Copenhagen); Peter Gibbon (Danish Institute for International Studies (DIIS))
    Abstract: Labour market segmentation in developing countries has been considered in a growing literature, some of which suggests an informal sector wage premium. However, such studies have mainly focused on urban labour markets and have not discriminated between the informally self-employed and wage workers. This paper examines segmentation in rural markets for agricultural wage workers in Ethiopia, controlling for location, farming systems and observed worker characteristics. Applying an endogenous switching model with simultaneous estimation of wage equations it establishes an informal sector wage premium, self-selection into the informal sector and sectorally-distinct wage determination mechanisms.
    Keywords: Labour market segmentation, Agricultural labour markets, Wage premiums, Large-scale agriculture, Ethiopia
    JEL: J41 J42 J43 J45
    Date: 2014–09
  5. By: Dyuti Banerjee (Department of Economics, Monash University, Australia); Sougata Poddar (Department of Economics, Faculty of Business and Law, Auckland University of Technology)
    Abstract: The purpose of this paper is to analyse the question, whether copyright infringement of digital products like software commonly labelled as piracy impedes innovation. We find the answer depends on the nature of piracy i.e. whether it is end-users or commercial piracy. For end user piracy, copyright infringement does not necessarily impede innovation; in fact it can be shown that it encourages innovation when the pirates are active. However, for commercial piracy, it always impedes innovation which has negative implications on the overall welfare of the society. We show under what conditions the government intervention through IPR protection strategy (like monitoring and imposing a fine to the pirate) can support the copyright holder for higher level of innovation. We find the socially optimally monitoring rate for the government that result in maximum innovation for the copyright holder
    Keywords: Innovation; piracy; monitoring; social welfare
    JEL: D21 D43 L13 L21 L26 O3
    Date: 2013–09
  6. By: Elvio Accinelli (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Edgar J. Sánchez Carrera (Universidad Autónoma de San Luis Potosí)
    Abstract: In this paper, we consider a society composed of citizens grouped in different economic strata based on income, who must pay taxes, but there are incentives to do so, and a set of public officials (auditors), whose function is to monitor compliance with the tax rules among citizens. We assume that corrupt auditors can accept bribes from evaders. We show that income inequality as a driver acts of corruption and tax evasion. Next we introduce an evolutionary model to analyze the progress or regression of evasion and corruption among public officials. We conclude with some observations on policies and incentives to combat these social ills.
    Keywords: corrupt behavior; taxes; evolutionary game.
    JEL: C72 C73 O11 O55 K42
  7. By: David Tuesta
    Abstract: Los bajos niveles de cotizacion a los sistemas de pensiones en America Latina son un enorme obstaculo que limita la puesta en practica de un sistema de seguridad social generalizado. Las tasas de cotizacion medidas como el indice de cotizantes respecto a la poblacion activa total se mantiene en una media de un 40 %, o un 60 % en el mejor de los casos. Aunque estudios anteriores explican esta situacion mediante factores relacionados con el crecimiento, las instituciones economicas y las consideraciones del mercado, solo unos pocos estudios han cuantificado los factores determinantes especificos que subyacen a este problema. Por tanto, este estudio pretende abordar el tema mediante el analisis de las encuestas nacionales de hogares de Brasil, Chile, Colombia, Mexico y Peru. Una vez identificada en las encuestas la pregunta especifica relativa a las cotizaciones al regimen de pensiones, se usan modelos probit para calcular la probabilidad de que ocurra este evento, condicionada por las variables que la teoria considera explicativas. El estudio revela la enorme importancia de los mercados de trabajo como factor condicional comun que afecta a la probabilidad de cotizar a cualquier sistema de pensiones de America Latina. Trabajar en la economia informal, ser auonomo o trabajar en una microempresa es particularmente importante y muestra los coeficientes mas altos de esta region geografica. El gran impacto de estas variables puede darnos pistas sobre la politica economica, en su intento por eliminar las barreras de las distorsiones del mercado de trabajo que limitan el efecto de los sistemas de seguridad social.
    Keywords: Pensiones, Cobertura, Cotizacion, Jubilacion, Seguridad Social, AFP, AFORE, Probit
    JEL: G23 H55 H75 J01 J26 J38 J32
    Date: 2014–08

This nep-iue issue is ©2014 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.