nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2014‒12‒08
eight papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Skills Training for Entrepreneurs in Developing Countries By Nathan Fiala
  2. A Multidimensional Perspective of Poverty, and its Relation with the Informal Labor Market: An Application to Ecuadorian and Turkish Data By Armagan-Tuna Aktuna Gunes; Carla Canelas
  3. Employment Transitions among the self-employed during the Great Recession By Beckhusen, Julia
  4. Tax Morale By Erzo F.P. Luttmer; Monica Singhal
  5. Saving for a (not so) Rainy Day: A Randomized Evaluation of Savings Groups in Mali By Lori Beaman; Dean Karlan; Bram Thuysbaert
  6. Informal and Formal Financial Resources and Small Business Resilience to Disasters By McDonald, Tia M.; Florax, Raymond; Marshal, Maria I.
  7. Credit Constraints and Impact on Farm Household Welfare: Evidence from Vietnam’s North Central Coast region By Tran, Minh Chau; Gan, Prof Christopher; Hu, Baiding
  8. Une évaluation de la taille de l'économie informelle par un système complet de demande estimé sur données monétaires et temporelles By Armagan Tuna Aktuna Gunes; Christophe Starzec; François Gardes

  1. By: Nathan Fiala
    Abstract: For most of the developing world, microenterprises are a key source of income and employment creation. For many countries the informal sector, where most of the small enterprises exist, represents over 80% of employment (ILO 2012). These businesses often have a difficult time growing. There are a number of reasons that have been put forward by policy makers and researchers for this lack of growth, including missing the necessary skills to manage a growing business.International NGOs and governments are interested in training programs. The ILO and World Bank have invested heavily in trainings, calling greater access to skills training a game changer. However, the results of recent impact evaluations suggest there is reason to be skeptical of training programs. There is a growing evidence that these programs do not contribute to enterprise growth. Researchers now argue that such trainings, when delivered alone, are not effective. The debate over the right way to approach unemployment and business creation is just starting.
    Date: 2014
  2. By: Armagan-Tuna Aktuna Gunes (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne); Carla Canelas (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)
    Abstract: In this paper, we study the links between time use, informal labor market, and poverty measures in two countries that strongly differ on their level of development, by means of a multidimensional poverty index, and a bivariate probit model to assess the changes in the joint probability of working in the informal sector while being considered poor.
    Keywords: Poverty; informality; time use
    Date: 2013–03
  3. By: Beckhusen, Julia
    Abstract: Entrepreneurs base their decision to start a business on a range of factors, from age, education and assets to macroeconomic conditions. While the majority of these factors have a well-understood impact on entering and exiting self-employment, the effect of macroeconomic conditions is less clear. During periods of recession, self-employment may increase due to its attractiveness as an alternative to unemployment. However, the difficulty of maintaining a business through the downturn can lead to a decrease in the self-employed. Understanding the transitions in and out of self-employment would help us better appreciate how entrepreneurs experience recessions. We use a robust set of longitudinal data from the Survey of Income and Program Participation (SIPP) to analyze the movements between self-employment, unemployment and wage-work during the Great Recession. The results suggest that the probability of entering self-employment depends on characteristics of the individual while movements out of self-employment are contingent on characteristics of the business. Furthermore, transitions from unemployment to self-employment increased during the recession months and transitions from self-employment to wage-work increased in the post recession months.
    Keywords: Self-employment, unemployment, longitudinal data, Labor and Human Capital, Public Economics, L26, J01, J60, C23,
    Date: 2014–05
  4. By: Erzo F.P. Luttmer; Monica Singhal
    Abstract: Standard economic models of tax compliance have focused on enforcement-driven compliance. Notably, tax administrators also tend to place a great deal of emphasis on the importance of improving "tax morale" by encouraging voluntary compliance, creating a culture of compliance, and changing social norms. Tax morale does indeed appear to be an important component of compliance decisions, and there is strong evidence that tax morale operates through a variety of underlying channels. There is less evidence - to date - that indicates we know how to leverage these channels to improve compliance and revenue collection in a consistently successful way.
    JEL: H26 O17
    Date: 2014–09
  5. By: Lori Beaman; Dean Karlan; Bram Thuysbaert
    Abstract: High transaction and contracting costs are often thought to create credit and savings market failures in developing countries. The microfinance movement grew largely out of business process innovations and subsidies that reduced these costs. We examine an alternative approach, one that infuses no external capital and introduces no change to formal contracts: an improved "technology" for managing informal, collaborative village-based savings groups. Such groups allow, in theory, for more efficient and lower- cost loans and informal savings, and in practice have been scaled up by international non-profit organizations to millions of members. Individuals save together and then lend the accumulated funds back out to themselves. In a randomized evaluation in Mali, we find improvements in food security, consumption smoothing, and buffer stock savings. Although we do find suggestive evidence of higher agricultural output, we do not find overall higher income or expenditure. We also do not find downstream impacts on health, education, social capital, and female decision-making power. Could this have happened before, without any external intervention? Yes. That is what makes the result striking, that indeed there were no resources provided nor legal institutional changes, yet the NGO-guided, improved informal processes led to important changes for households.
    JEL: D12 D91 O12
    Date: 2014–10
  6. By: McDonald, Tia M.; Florax, Raymond; Marshal, Maria I.
    Abstract: The following article examines the impact of Hurricane Katrina on small business success and adaptation. Small business success is characterized as increased revenues when compared to pre-disaster levels. Adaptation is characterized as post-Katrina changes to business infrastructure. A multivariate probit with sample selection allows the empirical analysis to account for the simultaneity of changes in revenue and adaptation and also sample selection bias introduced through business demise. The results suggest the importance of pre-disaster mitigation and adaptation activities as well as the effectiveness of formal financial resources in supporting adaptation. Informal financial resources are found to be largely ineffective.
    Keywords: Resilience, adaptation, mitigation, small business, multivariate probit with selection, Agribusiness, Environmental Economics and Policy, Risk and Uncertainty, D12, Q540,
    Date: 2014
  7. By: Tran, Minh Chau; Gan, Prof Christopher; Hu, Baiding
    Abstract: This study aims at identifying factors affecting formal credit constraint status of rural farm households in Vietnam’s North Central Coast region (NCC). Using the Direct Elicitation method (DEM), we consider both internal and external credit rationing. Empirical evidences confirm the importance of household head’s age, gender and education to household’s likelihood of being credit constrained. In addition, households who have advantages in farm land size, labour resources and non-farm income are less likely to be credit constrained. Poor households are observed to remain restricted by formal credit institutions. Results from the Endogenous Switching Regression model suggest that credit constraints have negative impact on household’s consumption per capita and informal credit can act as a substitute to mitigate the negative influence of formal credit constraints.
    Keywords: Credit constraint, determinants, impact, welfare, rural households, Agribusiness, Community/Rural/Urban Development, Consumer/Household Economics, International Development,
    Date: 2014
  8. By: Armagan Tuna Aktuna Gunes (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Christophe Starzec (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); François Gardes (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: Afin d'estimer la taille de l'économie informelle en Turquie, nous estimons un système de demande basé sur l'analyse du comportement de consommation proposée par Pissarides, Weber [1989], Lyssiotou et al. [2004] et Fortin et al. [2009]. Cette estimation est effectuée sur les dépenses monétaires et sur la somme des dépenses monétaires et temporelles (consacrées aux activités domestiques des ménages). Les informations nécessaires sur les inputs monétaires et temporels dans les dépenses de consommation des ménages sont obtenues par l'appariement statistique des enquêtes turques sur le Budget des Familles avec l'enquête sur l'Emploi du Temps [2006]. Comme prévu, la taille de l'économie informelle en Turquie estimée en utilisant les dépenses complètes (temps plus monnaie) est plus élevée que celles obtenues par l'approche des dépenses monétaires (respectivement 40,6% et 33,5% du PIB pour les travailleurs indépendants et 20,7% et 14,1% du PIB pour les salariés) et également plus élevée que celle obtenue par les méthodes macroéconomiques plus conventionnelles (35,1%).
    Keywords: Economie informelle; système complet de demande; dépenses complètes
    Date: 2014–03

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