nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2016‒10‒02
three papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Dutch disease, informality, and employment intensity in Colombia By Ricardo Arguello; Dora Elena Jiménez Giraldo; EDWIN ESTEBAN TORRES; Monica Gasca
  2. Occupational Choice in Early Industrializing Societies: Experimental Evidence on the Income and Health Effects of Industrial and Entrepreneurial Work By Christopher Blattman; Stefan Dercon
  3. Labour market reforms in Korea to promote inclusive growth By Randall S. Jones; Kohei Fukawa

  1. By: Ricardo Arguello; Dora Elena Jiménez Giraldo; EDWIN ESTEBAN TORRES; Monica Gasca
    Abstract: From the first half of the 2000s until 2014 the Colombian economy was under the influence of an oil and mining production and export boom that triggered the potential for Dutch Disease effects. As the boom has the potential to induce shifts in the sectorial composition of the economy, it may have significant effects on employment dynamics and on the evolution of employment intensity, especially when the informal sector is sizable. We study the potential effects of this boom, had it extended as forecasted by 2011. For this, we use a recursive dynamic computable general equilibrium model, calibrated to a 2011 Social Accounting Matrix of the Colombian economy, in which activities are differentiated in terms of their formal and informal components, and suitable details are included to account for the stream of income the government receives from the booming activities. We find that the resource shift and spending effects from the boom are sizeable, leading to a relative drop in exports in non-boom sectors and to shrinking output for most sectors of the economy, while employment in the formal sector and for skilled workers is favored. Furthermore, we find that the policy package designed by the Colombian government to face potential Dutch Disease effects on the economy has a limited impact on improving the resource shift and spending effects.
    Keywords: Exports, Terms of Trade, Dutch Disease, CGE modeling, Colombia
    JEL: O19 F17 C68
    Date: 2016
  2. By: Christopher Blattman; Stefan Dercon
    Abstract: As low-income countries industrialize, workers choose between informal self-employment and low-skill manufacturing. What do workers trade off, and what are the long run impacts of this occupational choice? Self-employment is thought to be volatile and risky, but to provide autonomy and flexibility. Industrial firms are criticized for poor wages and working conditions, but they could offer steady hours among other advantages. We worked with five Ethiopian industrial firms to randomize entry-level applicants to one of three treatment arms: an industrial job offer; a control group; or an “entrepreneurship” program of $300 plus business training. We followed the sample over a year. Industrial jobs offered more hours than the control group’s informal opportunities, but had little impact on incomes due to lower wages. Most applicants quit the sector quickly, finding industrial jobs unpleasant and risky. Indeed, serious health problems rose one percentage point for every month of industrial work. Applicants seem to understand the risks, but took the industrial work temporarily while searching for better work. Meanwhile, the entrepreneurship program stimulated self-employment, raised earnings by 33%, provided steady work hours, and halved the likelihood of taking an industrial job in future. Overall, when the barriers to self-employment were relieved, applicants appear to have preferred entrepreneurial to industrial labor.
    JEL: F16 J24 J81 O14 O17
    Date: 2016–09
  3. By: Randall S. Jones; Kohei Fukawa
    Abstract: Labour market reforms are essential to promote social cohesion by removing obstacles to employment, particularly for women, youth and older persons. In addition to reducing income inequality and poverty, such reforms would also sustain economic growth as Korea’s working-age population begins to decline in 2017. Breaking down labour market duality is crucial to reduce the wide wage disparity. Better conditions for non-regular workers would in turn promote greater labour participation. Increasing the take-up of maternity and parental leave, expanding the availability of high-quality childcare, reducing working time, narrowing the large gender wage gap and eliminating discrimination would also increase opportunities for women. Boosting youth employment from its current low level requires addressing labour market mismatch by better aligning the skills learned in school with those demanded by employers. Reducing the emphasis on seniority in setting wages by moving to more flexible systems and expanding training to improve the skills of older persons would allow them to extend their careers, thereby reducing old-age poverty. Des réformes du marché du travail en Corée pour promouvoir une croissance inclusive Les réformes du marché du travail sont essentielles pour promouvoir la cohésion sociale en supprimant les obstacles à l'emploi, en particulier pour les femmes, les jeunes et les personnes âgées. En plus de réduire l'inégalité de revenus et la pauvreté, de telles réformes soutiendraient la croissance économique, alors que la population en âge de travailler en Corée commence à décliner en 2017. Mettre fin au dualisme du marché du travail est crucial pour réduire la forte disparité des salaires. De meilleures conditions pour les travailleurs non réguliers favoriseraient à leur tour une participation accrue au marché du travail. L'augmentation de la prise de congés de maternité et parental, l'expansion de la disponibilité des services de garde d’enfants de haute qualité, une réduction du temps de travail, une réduction de l'important écart salarial entre hommes et femmes et l'élimination des discriminations accroîtraient les opportunités pour les femmes. Pour augmenter l'emploi des jeunes à partir de son faible niveau actuel, il est nécessaire de traiter le problème de l'inadéquation de l'offre et de la demande de travail par une meilleure adéquation entre les compétences acquises à l'école avec celles exigées par les employeurs. Réduire l'accent sur l'ancienneté dans la fixation des salaires en introduisant des systèmes plus flexibles et élargir la formation pour améliorer les compétences des plus anciens permettraient à ces derniers de prolonger leur carrière, réduisant ainsi la pauvreté des personnes âgées.
    Keywords: dualism, non-regular workers, work-life balance, labour market
    JEL: J21 J24 J26 J31
    Date: 2016–09–21

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