nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2014‒12‒24
ten papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Work and tax evasion incentive effects of social insurance programs. Evidence from an employment-based benefit extension By Marcelo Bérgolo; Guillermo Cruces
  2. Skills mismatch and informal sector participation among educated immigrants: Evidence from South Africa By Alexandra Doyle; Amos C Peters; Asha Sundaram
  3. Great opportunities or poor alternatives: self-employment, unemployment and paid employment over the business cycle By Ludo Visschers; Ana Millan; Matthias Kredler
  4. Undeclared Labour in Cournot Oligopoly By Minas Vlassis; Stefanos Mamakis
  5. Taxing the shadow: The political economy of sweatshops in La Salada, Argentina By Dewey, Matías
  6. Remittances, informal loans, and assets as risk-coping mechanisms: Evidence from agricultural households in rural Philippines By Marjorie C. Pajaron
  7. The Cost of Misguided Urbanization: The Case of Informal Settlements in Butuan City, Philippines By Navarro, Ma. Kresna; Almaden, Catherine Roween
  8. Women and political change: Evidence from the Egyptian revolution By Nelly EL MALLAKH; Mathilde MAUREL; Biagio SPECIALE
  9. Kenya : making quality employment the driver of development By Escudero, Verónica; López Mourelo, Elva
  10. Marché du travail en revue - Novembre 2014 By Tran, Vivian

  1. By: Marcelo Bérgolo (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Guillermo Cruces (CEDLAS-UNLP)
    Abstract: This article studies how social insurance programs shape individual’s incentives to take up registered employment and to report earnings to the tax authorities. The analysis is based on a social insurance reform in Uruguay that extended healthcare coverage to the dependent children of registered private/sector workers. The identification strategy relies on a comparison between individuals with and without dependent children before and after the reform. The reform increased benefit-eligible registered employment by 1.6 percentage points (about 5 percent above the prereform level), mainly due to an increase in labor force participation rather than to movement from unregistered to registered employment. The shift was greater for parents with younger children and for cohabiting adults whose partners’ jobs did not provide the couples’ children with access to the benefit. Finally, the reform increased the incidence of underreporting of salaried earnings by about 4 percentage points (25 percent higher than the pre-reform level), mostly for workers employed at small firms. The increase in fiscal revenue from higher levels of registered employment was several orders of magnitude greater than the loss of revenue due to an increase in underreporting.
    Keywords: labor supply, work incentives, social insurance, tax evasion
    JEL: J22 H26 O17
    Date: 2014–12
  2. By: Alexandra Doyle; Amos C Peters; Asha Sundaram (SALDRU and School of Economics, University of Cape Town)
    Abstract: Using South African census data, we show that immigrants with tertiary education from different origin country groups differ in their likelihood of obtaining a skilled job. Immigrants from advanced country groups outperform native internal migrants, while those from many African country groups underperform them. Immigrants with advanced degrees from certain country groups are also more likely to be employed in unskilled, informal sector jobs. Variation in outcomes across origin country groups is smaller at higher levels of education. We further explore characteristics of origin country groups correlated with immigrant outcomes. Our results suggest under-utilization of immigrant skills, which has particular implications for emerging economies grappling with skills shortages.
    JEL: F22 H52 J24 O24
    Date: 2014
  3. By: Ludo Visschers (Universidad Carlos III, Madrid and University of Edinburgh); Ana Millan (Universidad Carlos III de Madrid); Matthias Kredler (Universidad Carlos III Madrid)
    Abstract: In this paper, we study the flows between self-employment, unemployment and paid employment, and how these vary over the business cycle. First, we document these flows in the data, paying particular attention to previous labor market outcomes for workers entering self-employment, and subsequent labor market outcomes for those leaving self-employment, and how these are affected by cyclical conditions. Second, we construct a two-ladder equilibrium model of a frictional labor market capturing these flows: workers search both on and off the job, and receive business ideas while in any of the three states: self-, paid employment and unemployment. We study this model in an environment with aggregate shocks, which affect both the productivity of matches in the paid-employment sector, and the profitability of ideas for the self-employed. Third, we (plan to) calibrate to see how well it can quantitatively account for observed patterns over the business cycle. These allow us to have a notion of entry into self- employment by "opportunity" (highly profitable ideas), and "necessity" (lack of alternatives in paid employment), and how these vary over the business cycle, and to quantify "prosperity pull" of self-employment in good times, and "recession push" in bad times. Finally, we plan to study the impact of labor market policies on self-employment, and on unemployment, taking into account the option to enter self-employment.
    Date: 2014
  4. By: Minas Vlassis (Department of Economics, University of Crete, Greece); Stefanos Mamakis (Department of Economics, University of Crete)
    Abstract: In a duopoly where firms are competing by adjusting their quantities and the wages are exogenously determined, we analyze the undeclared labour phenomenon and its side effects in product market. Our analysis focuses on the opportunity cost between the taxation and the contributions for social security. The findings of our analysis indicate that there is a strong relationship between the tax rate, the rate of contributions for social insurance and undeclared labour. It is furthermore determined that any combination of tax (t) / contributions (k) rates under the t*1=k/(1+k) curve, will lead firms to practice undeclared labour, in order to avoid paying contributions for social security, since the alternative choice is more costly.
    Keywords: Undeclared Labour, Cournot Duopoly, Labour Unions, Unionisation, Endogenous Objectives
    JEL: J50 J51 L13 E26 H26
    Date: 2014–12–03
  5. By: Dewey, Matías
    Abstract: An effect of the informalization of production and distribution processes affecting the garment industry has been the spread of sweatshops in areas of industrial eclipse. Whilst the proliferation of these economies is usually analyzed as an outcome of sweeping macro trends, such as the “transformation of global capitalism,” the impact of domestic political decisions fostering an informal and illegal garment sector is less acknowledged. The present discussion paper focuses on informal arrangements that transform and reinforce such major forces at the local level. By alluding to shadow policies, this study sheds light on political actors who take advantage of the fact that some illegal economic activities are not morally contested and are considered to “preserve” jobs and “foster” consumption. Using data gathered in a six-month period of fieldwork in Buenos Aires, I demonstrate that the expansion of the La Salada market is the outcome of a well-established informal taxation system, a robust institutional framework that helps regulatethe growing demand of clothes and jobs by low-income sectors of the population.
    Abstract: Eine der Auswirkungen der Informalisierung von Produktions- und Distributionsprozessen auf die Bekleidungsindustrie ist die Verbreitung sogenannter Sweatshops - Niedriglohnbetriebe ohne Tarifvertragsrecht und Kündigungsschutz - in den Grauzonen der Wirtschaft. Während Forscher die starke Zunahme dieser Wirtschaftsformen üblicherweise als eine Folgeerscheinung weitreichender makroökonomischer Trends, wie etwa der "Transformation des globalen Kapitalismus" betrachten, werden die Auswirkungen politischer Entscheidungen, die innerhalb eines Landes zugunsten eines informellen und illegalen Bekleidungssektors getroffen werden, seltener wahrgenommen. Im Mittelpunkt dieses Beitrags stehen informelle Absprachen, die makroökonomische Triebkräfte auf lokaler Ebene transformieren und verstärken. Die Studie untersucht solche schattenpolitischen Maßnahmen und betrachtet hierzu politische Akteure, die es sich zunutze machen, dass einige illegale Wirtschaftsaktivitäten nicht als moralisch verwerflich gelten und als "arbeitsplatzerhaltend" und "konsumfördernd" angesehen werden. Auf der Grundlage von Daten aus einer sechsmonatigen Feldstudie in Buenos Aires wird gezeigt, dass die Ausweitung des Marktes La Salada die Auswirkung eines fest etablierten informellen Besteuerungssystems ist: eines stabilen institutionellen Rahmens, der zur Regelung des wachsenden Bedarfs an Kleidung und Arbeitsplätze von einkommensschwachen Bevölkerungsschichten beiträgt.
    Date: 2014
  6. By: Marjorie C. Pajaron (School of Economics, University of the Philippines Diliman)
    Abstract: This paper investigates whether agricultural households in rural Philippines insure their consumption and whether they use remittances, informal loans, or assets as ex post risk-coping mechanisms. Since these households have limited access to formal insurance and credit markets, any shocks to their volatile income can have substantial impacts. Using panel data and rainfall shocks as the instrumental variable for income shocks, this paper finds evidence that households depend on their networks of family and friends to partially insure their consumption. 2SLS and OLS estimates show that approximately 27 percent of consumption is insured. International remittances from migrant members replace about 11 percent of income decline while domestic transfers replace about 14 percent. Informal loans, however, decrease as rainfall shocks increase. Borrowers and lenders may be experiencing similar shocks, which would reduce the effectiveness of local risk-sharing arrangements.
    Keywords: Risk-coping, Remittance, Informal loan, Consumption insurance, Rainfall shocks, Philippines
    JEL: O12 Q12 D81 D12 F22 F24
    Date: 2014–12
  7. By: Navarro, Ma. Kresna; Almaden, Catherine Roween
    Abstract: The informal settlements in Butuan City, Philippines pose the intractable problem of housing and providing services for the urban poor. They exact tremendous costs to government infrastructure projects and the city as a whole. In this study, these costs are accounted for, particularly the costs the government will incur to compensate them for being displaced in the implementation of public infrastructure project. Primary data were collected through inventory of losses (IOL), socio-economic survey (SES) and the replacement cost surveys. Secondary data were obtained through key informant interviews with different stakeholders. The paper quantifies the costs of compensating them thru replacement of their affected resources and providing resettlement. It also establishes different types of compensation to secure just terms for all parties. It presents a rich picture of how the informal settlers affect urban environment and the monetary and operational challenges they pose to the government and the society at large.
    Keywords: Informal Settlements, Social Cost, Urbanization
    JEL: O17 O53 Q5 Q51
    Date: 2014–09–01
  8. By: Nelly EL MALLAKH (FERDI); Mathilde MAUREL (Centre d'Economie de la Sorbonne CNRS - Université Paris 1); Biagio SPECIALE (FERDI)
    Abstract: We analyze the effects of the 2011 Egyptian revolution on the relative labor market conditions of women and men using panel information from the Egypt Labor Market Panel Survey (ELMPS). We construct our measure of intensity of the revolution – the governorate-level number of martyrs, i.e. demonstrators who died during the protests - using unique information from the Statistical Database of the Egyptian Revolution. We find that the revolution has reduced the gender gap in labor force participation, employment, and probability of working in the private sector, and it has caused an increase in women’s probability of working in the informal sector. The political change has affected mostly the relative labor market outcomes of women in households at the bottom of the pre-revolution income distribution. We link these findings to the literature showing how a relevant temporary shock to the labor division between women and men can have long run consequences on the role of women in society.Online Appendix :
    JEL: J16 J21 J22 J30
    Date: 2014–12
  9. By: Escudero, Verónica; López Mourelo, Elva
    Keywords: employment, youth employment, employment policy, informal economy, trend, Kenya, emploi, emploi des jeunes, politique de l'emploi, économie informelle, tendance, Kenya, empleo, empleo de jóvenes, política de empleo, economía informal, tendencia, Kenya
    Date: 2013
  10. By: Tran, Vivian
    Abstract: Alors que les adeptes des lois sur le salaire minimum les considèrent comme essentielles pour améliorer le bien-être social et économique, la mise en application des lois sur le salaire minimum peut aussi entraîner une hausse du chômage et un déplacement des travailleurs dans le secteur non structuré où les normes de protection des travailleurs et du milieu de travail ont moins de chances d’être respectées par rapport au secteur structuré. Une étude intitulée « Estimation des effets du salaire minimum dans un pays en développement : Une approche conceptuelle de la discontinuité de la densité » (Rapport de recherche du RCCMTC no 142) par le membre affilié du RCCMTC Hugo Jales (Université de la Colombie-Britannique) propose un cadre innovateur pour évaluer de façon empirique les effets du salaire minimum sur le chômage, le salaire moyen, la mobilité des secteurs, l’inégalité des salaires, l’importance du secteur non structuré et les recettes fiscales du travail. Selon l’étude, alors que la politique du salaire minimum peut augmenter le salaire moyen et réduire l’inégalité des revenus, ladite politique a aussi l’effet involontaire de causer la baisse des recettes fiscales du travail, du fait des déplacements des travailleurs du secteur structuré vers le secteur non structuré. Les adeptes de la syndicalisation font valoir que les syndicats ont des impacts bénéfiques sur le bien-être social, comme celui d’accroître pour les travailleurs leurs salaires, avantages sociaux et conditions de travail, mais d’autres preuves semblent montrer les effets négatifs des syndicats sur les bénéfices et l’investissement des entreprises, et sur la croissance de l’emploi. Des recherches plus récentes ont examiné la possibilité de la réaction en chaîne des syndicats sur les revenus des travailleurs non syndiqués. De fait, on a trouvé qu’aux États-Unis cette réaction en chaîne comptait pour jusqu’à un tiers de la hausse de l’inégalité des revenus au cours des dernières décennies. Dans une étude intitulée « Les effets de la législation concernant les relations de travail sur les taux de syndicalisation : les preuves pour les provinces canadiennes » (Rapport de recherche du RCCMTC no 141), les membres affiliés du RCCMTC Scott Legree (Université de Waterloo), Tammy Schirle (Université Wilfrid Laurier) et Mikal Skuterud (Université de Waterloo) examinent l’impact des changements de la législation du travail sur les taux de syndicalisation au Canada. Ils découvrent que, bien que cette législation ait le potentiel de fortement accroître ces taux, la hausse de la syndicalisation du fait des réformes de la législation du travail a tendance à profiter aux travailleurs ayant des salaires assez élevés, même à ceux n’étant pas syndiqués. Les auteurs estiment donc que ces réformes ont peu de chances de réduire de façon significative l’inégalité des revenus.
    Keywords: salaire minimal, informalité, chômage, discontinuité de la densité, inégalité des salaires, recettes fiscales du travail, secteur structuré, lï
    JEL: J60 J31 J30 J50 J58 K31
    Date: 2014–11–27

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