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

  1. Determinants of Transitions across Formal/Informal Sectors in Egypt By Aysit Tansel; Zeynel Abidin Ozdemir
  2. Is There an Informal Employment Wage Penalty in Egypt? By Tansel, Aysit; Keskin, Halil Ibrahim; Ozdemir, Zeynel Abidin
  3. The Impact of Syrian Refugees on Natives' Labor Market Outcomes in Turkey: Evidence from a Quasi-Experimental Design By Ceritoglu, Evren; Gurcihan Yunculer, H. Burcu; Torun, Huzeyfe; Tumen, Semih
  4. Entering and Leaving Self-Employment: A Panel Data Analysis for 12 Developing Countries By Cho, Yoon Y.; Robalino, David A.; Romero, Jose
  5. The Japanese Labour Market during the Global Financial Crisis and the Role of Non-Standard Work: A Micro Perspective By Hijzen, Alexander; Kambayashi, Ryo; Teruyama, Hiroshi; Genda, Yuji
  6. Dynamic Tax Evasion with Audits based on Conspicuous Consumption By Rosella Levaggi; Francesco Menoncin

  1. By: Aysit Tansel (Department of Economics, METU; Institute for the Study of Labor (IZA) Bonn, Germany; Economic Research Forum (ERF) Cairo, Egypt); Zeynel Abidin Ozdemir (Department of Economics, Gazi University; Economic Research Forum (ERF) Cairo, Egypt)
    Abstract: Informality is a salient feature of labor market in Egypt as it is the case with many developing countries. This is the first study of the determinants of worker transitions between various labor market states using panel data from Egypt. We first provide a diagnosis of dynamic worker flows across different labor market states. We develop transition probabilities by gender across different labor market states utilizing Markov transition processes. Next we identify the effects of individual, household, job characteristics and location on different mobility patterns by estimating a multinomial logit regression. The results point to the highly static nature of the Egyptian labor market. Government employment and the out of labor force are the most persistent labor market states. Further, only a few of the explanatory variables except high levels of education are found to have predictive power in explaining the transitions from formal wage, informal wage, self-employment, unemployment government employment and out of labor market states.
    Keywords: Labor market dynamics, informality, Markov processes, multinomial logit, Egypt.
    JEL: J21 J24 J40 J63 O17
    Date: 2015–01
  2. By: Tansel, Aysit (Cornell University); Keskin, Halil Ibrahim (Gazi University); Ozdemir, Zeynel Abidin (Gazi University)
    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.
    Keywords: formal and informal wage gap, formal and informal employment, panel data, Egypt
    JEL: J21 J31 J40 O17
    Date: 2015–09
  3. By: Ceritoglu, Evren (Central Bank of Turkey); Gurcihan Yunculer, H. Burcu (Central Bank of Turkey); Torun, Huzeyfe (Central Bank of Turkey); Tumen, Semih (Central Bank of Turkey)
    Abstract: Civil war in Syria, which started in March 2011, has led to a massive wave of forced immigration from the Northern Syria to the Southeastern regions of Turkey. This paper exploits this natural experiment to estimate the impact of Syrian refugees on the labor market outcomes of natives in Turkey. Using a difference-in-differences strategy, we find that immigration has considerably affected the employment outcomes of natives, while its impact on wage outcomes has been negligible. We document notable employment losses among informal workers as a consequence of refugee inflows. The majority of those who lost their informal jobs have either left the labor force or remained unemployed. Overall, unemployment rates have increased, while labor force participation, informal employment, and job finding rates have declined among natives. Disadvantaged groups – i.e., females, younger workers, and less-educated workers – have been affected the worst. The prevalence of informal employment in the Turkish labor markets has amplified the negative impact of Syrian refugee inflows on natives' labor market outcomes.
    Keywords: Syrian civil war, immigration, Turkey, labor market, informality, difference in differences
    JEL: J15 J21 J61 C21
    Date: 2015–10
  4. By: Cho, Yoon Y. (World Bank); Robalino, David A. (World Bank); Romero, Jose (World Bank)
    Abstract: This paper examines the determinants of labor market transitions into and out of self-employment (own-account work and employer), using panel data from 12 developing countries in multiple regions. Despite cross-country heterogeneity, a few consistent patterns emerge. Entering the labor market through, or moving from wage employment into, own-account work is generally infrequent even during economic downturns, suggesting that own-account work is not an automatic choice for subsistence. Some better educated and older workers become employers by starting their business with paid employees or by growing their business from own-account work, although the overall chances of becoming employers are quite low and employer downsizing to own-account work is common. Reflecting the frequent transitions between own-account work and employer statuses, in many cases, particularly in middle-income countries, a substantial proportion of own-account workers share common characteristics with employers (and vice versa). The results suggest that there is a role for programs to support employers sustain its activities and facilitate own-account workers to become employers.
    Keywords: labor market transitions, self-employment, entrepreneurship
    JEL: O12 J24
    Date: 2015–09
  5. By: Hijzen, Alexander (OECD); Kambayashi, Ryo (Hitotsubashi University); Teruyama, Hiroshi (Kyoto University); Genda, Yuji (University of Tokyo)
    Abstract: This paper analyses aggregate labour dynamics during the global financial crisis in Japan and the role of nonstandard work using micro data. The analysis proceeds in two steps. First, using comprehensive establishment-level datasets for the period 1991-2009, it provides a detailed portrait of the adjustment behaviour of establishments at the micro level. Second, it compares aggregate labour market dynamics during the global financial crisis with that observed during the 1997 crisis and decomposes the observed differences into components that can be attributed to changes in the micro-adjustment behaviour of Japanese establishments, changes in the incidence of non-standard work and changes in the distribution of shocks across establishments. It finds that the incidence of non-standard work has increased considerably, worker turnover is much higher among non-standard than standard workers and adjustments in working-time are less important for non-standard workers. Counterfactual simulations suggest that the employment response during the global crisis would have been smaller if the incidence of non-standard work remained at the level observed during the 1997 crisis. The relatively small employment response observed during the global financial crisis is therefore driven by factors others than the increase in the incidence of non-standard work.
    Keywords: labour market duality, labour market resilience, job quality, temporary work, crisis
    JEL: D22 E24 J23 J41
    Date: 2015–09
  6. By: Rosella Levaggi (Università di Brescia); Francesco Menoncin (Università di Brescia)
    Abstract: We solve the problem of a representative agent who maximises the expected present utility of his intertemporal consumption under the as- sumption that an optimal fraction of his wealth is hidden to the tax au- thorities (we show conditions under which evasion is expedient). Evasion affects the capital dynamics in two ways: the growth rate of capital in- creases because some taxes are not paid, but when caught evading the consumer has to pay a fee (proportional to evasion). Consumption can be allocated between ordinary goods and so-called conspicuous goods. The latter are used by the Government for targeting the audit, since they are considered like an indicator of consumer's wealth. In fact, the probabil- ity to be caught is a function of the distance between the actual and the presumed consumption in conspicuous goods. We find a closed form solu- tion to the dynamic optimization problem and show how fiscal and audit parameters affect the optimal evasion and the optimal allocation between the two consumptions.
    Keywords: dynamic tax evasion, targeted audits, conspicuous consumption
    JEL: G11 H26 H42
    Date: 2015–10

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