nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2014‒12‒29
ten papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Segmentation and informality in Vietnam: A survey of the literature By Cling, Jean-Pierre; Razafindrakoto, Mireille; Roubaud, François
  2. Informality and government enforcement in Latin America By Rodrigo Ceni
  3. A Theory of Compliance with Minimum Wage Law By Simplice Anutechia Asongu; Mohamed Jellal
  4. Pure Strategies and Undeclared Labour in Unionized Oligopoly By Minas Vlassis; Stefanos Mamakis
  5. Dual Labour Markets and (Lack of) On-The-Job Training: PIAAC Evidence from Spain and Other EU Countries By Cabrales, Antonio; Dolado, Juan J.; Mora, Ricardo
  6. Do Interventions Change the Network? A Panel Peer-Effect Model Accounting for Endogenous Network Changes By Comola, Margherita; Prina, Silvia
  7. Is Abatement Effective in the Presence of Corruption? A Theoretical Exploration By Athanasios Lapatinas; Anastasia Litina; Eftichios Sophocles Sartzetakis
  8. Environmental Legislation and International Trade: Theory, Policy and Indian experience By Chatterjee, Tonmoy
  9. The impact of piracy on prominent and non-prominent software developers By Rasch, Alexander; Wenzel, Tobias
  10. Global trajectories, dynamics, and tendencies of business software piracy: benchmarking IPRs harmonization By Simplice Anutechia Asongu; Antonio Andrés

  1. By: Cling, Jean-Pierre; Razafindrakoto, Mireille; Roubaud, François
    Abstract: Labour market segmentation is usually defined as the division of the labour markets into separate submarkets or segments, distinguished by different characteristics and behavioural rules (incomes, contracts, etc.). The economic debate on the segmentation issue has been focusing in developed countries, and especially in Europe, on contractual segmentation and dualism. However, in developing countries such as Vietnam which is the focus of this study, wage work is marginal and the approach to labour market segmentation is necessarily slightly different. Indeed, most workers are engaged in the informal economy and many of them are self-employed in their own household business. Starting with an analysis of the main characteristics of the national labour market, this paper presents a survey of the literature on informality and labour market segmentation in Vietnam (section 2). Section 3 describes the institutional background related to firm registration and social protection in Vietnam, and analyses the reasons for informality in relationship with the institutional framework. Section 4 describes the reforms being put in place and employment strategies related to the informal economy. Policy recommendations are proposed in the last section.
    Keywords: Informel; marché du travail; Informality; Labour market; segmentation; Vietnam;
    JEL: J24 J31 O17
    Date: 2014–11
  2. By: Rodrigo Ceni (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)
    Abstract: This paper analyzes how the informality responds to the quality of the labor enforcement and the bundle of benefits that the formal workers receive in different countries of Latin America. Countries with different levels of informality were compared, highlighting the features that could induce these different levels. In a general equilibrium framework, the government chooses a level of government enforcement and a bundle of benefits maximizing the workers’ utility subject to a budget constraint, a representative firm chooses the share of workers in formality and informality that they want to hire, and the workers offer a share of time in formality and informality. I estimate the main parameters of the model, the production function, the quality of government enforcement and the quality of benefits, for five countries: Argentina, Brazil, Colombia, Peru and Uruguay. Differences in the quality functions of the government enforcement and benefits are found, as well as in the fines established to enforce the agents.
    Keywords: Informality, labor regulation, enforcement, Latin America
    JEL: E26 H26 H53 O17 O54
    Date: 2014–12
  3. By: Simplice Anutechia Asongu (Association of African Young Economists); Mohamed Jellal (Al Makrîzi Institut d'Economie)
    Abstract: Purpose – In this paper, we introduce firm heterogeneity in the context of a model of non-compliance with minimum wage legislation. Design/methodology/approach – Theoretical modeling under government compliance policy and wages & employment under non compliance. Findings – The introduction of heterogeneity in the ease with which firms can be monitored for non compliance allows us to show that non-compliance will persist in sectors which are relatively difficult to monitor, despite the government implementing non stochastic monitoring. Moreover, we show that the incentive not to comply is an increasing function of the level of the minimum wage and increasing function of the gap between the minimum wage and the competitive wage rate. Originality/value – We have shown why non compliance persists in certain sectors of activity despite frequent inspection by government agencies.
    Keywords: Minimum wage legislation, informal sector in LDCs
    JEL: H26 O17
    Date: 2014–09
  4. By: Minas Vlassis (Department of Economics, University of Crete, Greece); Stefanos Mamakis (Department of Economics, University of Crete)
    Abstract: In a unionized Cournot duopoly under decentralized wage bargaining regime, we analyzed undeclared labour in a matrix game. We reveal the opportunity cost between taxation and contributions for social insurance that firms and unions face, while we examine all relevant possible unilateral deviations from firms and unions. Our research concludes in three different possible equilibria that all three of them � under certain circumstances � may constitute a Nash SPE. Further, we conclude that if both firms declare their labour, then the incentive for firm's deviation will arise if the bargaining power of unions is low enough (b < bcr1), while unions will silently consent to undeclared labour if the rate for social insurance- contributions is great enough (k > kcr1). If both firms practice undeclared labour, then there can be none critical value that will alter firms- policy to declared labour; thus, in this case, unions will consent to undeclared labour only if k is low enough (k < kcr2). Finally, in the case that one firm declares its labour while the other one not, firm's incentive to alter its policy to declared labour occurs if the direct tax rate is great enough (ta > 1- te), while the incentive to discontinue practicing undeclared labour occurs if b is low enough (b < bcr2). However, in this latter case, there can be none incentive for unions to consent to the change of declared to undeclared labour.
    Keywords: Undeclared Labour, Cournot Duopoly, Labour Unions, Unionisation, Endogenous Objectives
    JEL: J50 J51 L13 E26 H26
    Date: 2014–12–03
  5. By: Cabrales, Antonio; Dolado, Juan J.; Mora, Ricardo
    Abstract: Using the Spanish micro data from the Programme for the International Assessment of Adult Competencies (PIAAC), we first document how the excessive gap in employment protection between indefinite and temporary workers leads to large differentials in on-the-job training (OTJ) against the latter. Next, we find that that the lower specific training received by temporary workers is correlated with lower literacy and numeracy scores achieved in the PIAAC study. Finally, we provide further PIAAC cross-country evidence showing that OJT gaps are quite lower in those European labour markets where dualism is less entrenched than in those where it is more extended.
    Keywords: cognitive skills; dual labour market; on-the-job training; severance pay
    JEL: C14 C52 D24 J24
    Date: 2014–11
  6. By: Comola, Margherita (Paris School of Economics); Prina, Silvia (Case Western Reserve University)
    Abstract: A large literature has studied how peers affect behavior by exploiting the preexisting social network structure only. What if networks rewire in response to changes in the economic environment, such as a randomized intervention? We exploit a unique panel dataset that contains detailed information on the network of informal financial transactions before and after a field experiment that randomized access to savings accounts in Nepal. First, we show that the intervention affects the structure of the network of informal financial transactions among households. Second, we estimate a panel model of peer effects in expenditure where the network may change endogenously, and we exploit the design of the randomized intervention to instrument for the observed network change. Our results suggest that disregarding the network change would underestimate both total peer effects and the overall impact of the intervention.
    Keywords: networks, peer effects, financial access
    JEL: C31 D85 G2 O16
    Date: 2014–11
  7. By: Athanasios Lapatinas (University of Ioannina); Anastasia Litina (CREA, Université du Luxembourg); Eftichios Sophocles Sartzetakis (University of Macedonia)
    Abstract: The paper introduces an additional channel via which corruption may adversely affect environmental quality. It is argued that, in the presence of corruption, politicians may allocate a large fraction of public funds to environmental projects aiming not at improving environmental quality, but rather at increasing their ability to extract rents. This type of behavior has a direct and an indirect effect on environmental quality. First, due to extensive rent-seeking, the effectiveness of environmental projects is disproportional to the amount of public funds allocated to them. Second, citizens who observe the poor outcome of environmental projects, increase tax evasion thus reducing public funds. A vicious circle of extensive tax evasion and rent seeking activities emerges, that has a detrimental effect on envi- ronmental quality. Anecdotal evidence from a number of countries that experience high levels of corruption shows little or no improvements in environmental quality despite the implementation of environmental projects. In line with our theoretical findings, this ineffectiveness of the environmental policy is present even when the technology involved is advanced.
    Keywords: Corruption, Environment, Technology
    JEL: Q5 D73
    Date: 2014
  8. By: Chatterjee, Tonmoy
    Abstract: This paper considers some contemporary environmental problems like carbon emission, deforestation etc, faced by mainly the developing nations of the world. In this context I have considered some facts and figures of Indian Tannery industry for realization of above mentioned issue. In this paper an attempt has been made to analyze theoretically, the effect of environmental pollution on the output of different sectors in a small open economy. Here, I have presented a theoretical model based on the general equilibrium framework, which mainly highlights on a paradoxical result. The paradox exists in the sense that, with strict environmental control, the formal sector subcontracts their production to the informal sector, thereby accentuating the total level of pollution faced by the society.
    Keywords: Dirty goods, Environmental pollution, Applied General equilibrium and Informal sector
    JEL: D58 Q53 Q58
    Date: 2014–12–11
  9. By: Rasch, Alexander; Wenzel, Tobias
    Abstract: This paper studies the impact of software piracy on prominent and non-prominent software developers in markets based on a two-sided platform business. Consumer behavior is imperfect and, when adopting a platform, consumers only take prominent software into account. We show that prominent software exhibits higher piracy rates than non-prominent software. However, contrary to intuition, this does not necessarily mean that prominent software developers benefit more from increased software protection. Indeed, we show that prominent developers may lose out whereas non-prominent developers may gain from better software protection.
    Keywords: Piracy,Platform,Software,Two-sided market
    JEL: L11 L86
    Date: 2014
  10. By: Simplice Anutechia Asongu (Association of African Young Economists); Antonio Andrés (Universidad Camilo Jose CelaFacultad)
    Abstract: In this paper, we examine global trajectories, dynamics, and tendencies of software piracy to ease the benchmarking of current efforts towards harmonizing the standards and enforcements of Intellectual Property Rights (henceforth IPRs) protection worldwide. Our empirical exercise is based on 15 different panel regressions, which together consists of 99 countries. The richness of the dataset allows us to disaggregate countries into fundamental characteristics of business 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). Our main finding suggest that, a genuine timeframe for standardizing IPRs laws in the fight against software piracy is most feasible within a horizon of 4.3 to 10.4 years. In other words, full (100%) convergence within the specified timeframe will mean the enforcements of IPRs regimes without distinction of nationality or locality within identified fundamental characteristics of software piracy. The absence of convergence (in absolute and conditional terms) for the World panel indicates that, blanket policies may not be effective unless they are contingent on the prevailing trajectories, dynamics and tendencies of software piracy. Policy implications and caveats are also discussed.
    Keywords: Piracy, Business Software, Software piracy, Intellectual Property Rights, Panel data, Convergence
    JEL: F42 K42 O34 O38 O57
    Date: 2014–10

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