nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2015‒10‒04
six papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Skill Acquisition in the Informal Economy and Schooling Decisions: Evidence from Emerging Economies By Semih Tumen
  2. Social Protection to the Informal Sector: The Role of Minimum Wage and Income Transfer Policies By Fernando Alberto Groisman; Albano Blas Vergara; Analía Calero; Julia Liniado; María Eugenia Sconfienza; Maria Soledad Cubas; Santiago Boffi
  3. Is There An Informal Employment Wage Penalty In Egypt? By Aysit Tansel; Halil Ibrahim Keskin; Zeynel Abidin Ozdemir
  4. Input Trade Liberalisation and Wage-inequality with Non-traded Goods By Soumyatanu Mukherjee
  5. When Culture Governs Business Practice…. A Look at Indian Diamond Cutting and Polishing Industry By Rao Indu
  6. Brechas de ingresos laborales en el Perú urbano: una exploración de la economía informal By José María Rentería

  1. By: Semih Tumen
    Abstract: Informal jobs offer skill acquisition opportunities that may facilitate a future switch to formal employment for young workers. In this sense, informal training on the job may be a viable alternative to formal schooling in an economy with a large and diverse informal sector. In this paper, I investigate if these considerations are relevant for the schooling decisions of young individuals using panel data for 17 Latin American countries and micro-level data for Turkey. Specifically, I ask if the prevalence of informal jobs distorts schooling attainment. I concentrate on three measures of schooling outcomes : (1) secondary education enrollment rate, (2) out-of-school rate for lower secondary school, and (3) tertiary education graduation rate. I find that the secondary education enrollment rate is negatively correlated with the size of the informal economy, while the out-of-school rate is positively correlated. Moreover, the tertiary education graduation rates tend to fall as the informal employment opportunities increase. This means that informal training on the job may be crowding out school education in developing countries. Policies that can potentially affect the size of the informal sector should take into consideration these second-round effects on aggregate schooling outcomes.
    Keywords: Informal economy, Skill acquisition, Schooling outcomes, Latin America, Turkey
    JEL: E26 I21 J24 O17
    Date: 2015
  2. By: Fernando Alberto Groisman; Albano Blas Vergara; Analía Calero; Julia Liniado; María Eugenia Sconfienza; Maria Soledad Cubas; Santiago Boffi
    Abstract: The objective of this study is to examine the impact that changes in minimum wage and the main income transfer programs have had on the economic participation of the population and the informal sector in Argentina. The magnitude and importance that both policies have had in the Argentine case makes it possible carry out an in-depth analysis of these topics. In effect, minimum wage was periodically modified between 2002 and 2014 to be among the highest in the Latin American region while the mentioned income transfer program – called the Universal Child Allowance – has benefited some 40 percent of children residing in the country since its implementation. The obtained evidence suggests that modifications to minimum wage did not produce adverse effects on employment or have a substantial impact on the probabilities of entering the informal sector. Regarding the income transfers, it was possible to confirm that it did not encourage adults in beneficiary households to become economically inactive.
    Keywords: Informality, Social Protection, and Minimum Wage
    JEL: J2 J4 J6
    Date: 2015
  3. By: Aysit Tansel (Department of Economics, Middle East Technical University, 06531 Ankara, Turkey, Institute for Study of Labor (IZA), P.O. Box 7240, D-53072 Bonn, Germany, and Economic Research Forum (ERF) Cairo,); Halil Ibrahim Keskin (Department of Econometrics, Gazi Unversity, Besevler, 06500Ankara, Turkey); Zeynel Abidin Ozdemir (Department of Economics, Gazi Unversity, Besevler, 06500 Ankara, Turkey)
    Abstract: This paper considers the private sector wage earners in Egypt and examine their wage distribution during 1998-2012 using Egyptian Labor Market Panel Survey. We first estimate Mincer wage equations both at the mean and at different quantiles of the wage distribution taking into account observable characteristics. Then we make use of the panel feature of the data and estimate models taking into account unobservable characteristics. We also consider the possibility of nonlinearity in covariate effects and estimate a variant of matching models. In all cases we find a persistent informal wage penalty in the face of extensive sensitivity checks. It is smaller when unobserved heterogeneity is taken into account and larger at the top than at the bottom of the conditional wage distribution. We also examine the informal wage penalty over time during the study period and in different groups according to experience and education. The informal wage penalty has increased recently over time and is larger for the better educated but smaller for the more experienced.
    Date: 2015
  4. By: Soumyatanu Mukherjee
    Abstract: This paper develops a multi-sector full-employment general equilibrium model with internationally non-traded goods and international fragmentation in skill-intensive production, to understand the mechanism how trade-induced growth in the skill-intensive sector is mediated to informal sector wages and employment through the existence of finished non-tradable and the corresponding domestic demand-supply forces. The underlying developing economy is characterised by dual unskilled labour market with unionised formal and non-unionised informal sectors, consistent with the empirical literature on developing economies India. Numerical analysis has also been performed to simulate how the changes in elasticities of factor substitution in production in different sectors account for the movement in informal wage and therefore the movement in skilled–unskilled wage gap. This paper challenges the view that the relative wage-inequality in a DC like India with rigid organised sector labour market has unequivocally been governed only by the increase in the skilled wages. An extension with involuntary unemployment of skilled labour using the fair wage hypothesis has also been presented that effectively demonstrates the robustness of the results obtained under full-employment model.
    Keywords: Input trade liberalisation; non-traded goods; informal wage; skilled labour unemployment; wage-inequality
  5. By: Rao Indu
    Abstract: In absence of the well-defined strategy, structure and processes in informal firms in emerging markets, it is the intangible aspect of organizing, specifically, the organizational culture that governs business practices. This paper investigates organizational culture of one such firm of the Indian diamond industry to contribute to this emerging area of scholarship. Today, global value chains are comprised of both formal and informal firms but we know little about the informal firm. Since managers of the formal firms need to interact, negotiate and deal with informal firms to transact global business, they also need to understand the organizational aspects of the informal firm. I make an attempt in this direction to inform scholars and practitioners about the organizational aspects of such firms by investigating organizational culture in the Indian Diamond Industry.
  6. By: José María Rentería (Departamento de Economía de la PUC del Perú)
    Abstract: La informalidad es un fenómeno ampliamente presente en la economía peruana, aunque con distintos matices. En el presente documento se explora la hipótesis de la segmentación laboral, descomponiendo las brechas de ingresos por trabajo usando una técnica no paramétrica propuesta por Ñopo (2004). Los resultados revelan que una parte considerable de las brechas de ingresos entre formales e informales de similar categoría de ocupación no se puede explicar por factores observables. Este hallazgo no permite refutar la hipótesis de la segmentación. Pese a ello, las brechas totales se han reducido durante la última década. El grupo de trabajadores independientes muestra tendencias opuestas a las del resto. JEL Classification-JEL: C14, O17
    Keywords: Economía informal, segmentación laboral, emparejamiento, Peru
    Date: 2015

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