nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2020‒03‒23
six papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Do Firms Exit the Formal Economy after a Minimum Wage Hike ? By Bossavie,Laurent Loic Yves; Acar,Aysenur; Makovec,Mattia
  2. Measuring the size of the shadow economy using a dynamic general equilibrium model with trends: a new dataset By Chung, Federico; Purkey, Liam; Solis-Garcia, Mario
  3. Informal cross-border trade in Africa By Pace, Kathryn; Bouët, Antoine; Glauber, Joseph W.
  4. Household Savings in Central Eastern and Southeastern Europe : How Do Poorer Households Save? By Beckmann,Elisabeth
  5. Meet People Where They Are: Building Formal Credit Using Informal Financial Traditions By Tom Akana
  6. Empleo y emprendimiento en Bogotá By Cristina Fernández

  1. By: Bossavie,Laurent Loic Yves; Acar,Aysenur; Makovec,Mattia
    Abstract: This paper explores the effects of a large minimum wage hike on firm exits from the formal economy, and its associated impacts on employment and informality. It uses an exceptionally rich linked employer-employee dataset on the universe of formal firms and workers in a developing economy. Data on the full wage distribution in firms allows to precisely measure minimum wage exposure, and to estimate the causal effect of the hike in a difference-in-difference setting. The hike is found to significantly increase the destruction rate of formal firms. Effects are concentrated among small and low-productivity firms while exits of high-productivity firms are unaffected. The increase in firm exits is larger in industries with small profit margins, higher labor shares and stronger market competition. We also evidence negative effects on formal employment, which mainly originate from firm destruction rather than employment cuts in surviving firms. Corroborative evidence indicates that workers from exiting firms mostly transition into informal employment, instead of being jobless after the hike.
    Keywords: Labor Standards,Rural Labor Markets,Inequality,Public Sector Administrative and Civil Service Reform,Administrative&Civil Service Reform,Public Sector Administrative&Civil Service Reform,De Facto Governments,Democratic Government,Employment and Unemployment,Labor Markets
    Date: 2019–02–15
  2. By: Chung, Federico; Purkey, Liam; Solis-Garcia, Mario
    Abstract: We provide estimates of the size and dollar value of shadow economy for a set of countries between 1950 and 2015, following the methodology of Solis-Garcia and Xie (2018).
    Keywords: informal sector; business cycles; DSGE models
    JEL: E26 E32 O17
    Date: 2020–02–28
  3. By: Pace, Kathryn; Bouët, Antoine; Glauber, Joseph W.
    Abstract: As ICBT appears to be so large and is heavily linked to food security, economic development, and women’s empowerment, it is important to obtain accurate measurements of this type of trade. More accurate data can improve the statistical measurements of balance of payments and external accounts, improving global trade measurement and modeling, and facilitate the development of more accurate domestic food balance sheets. Overall, measurement of ICBT in Africa can provide a more accurate picture of other aspects related to informal trade, including information on informal labor markets and movement patterns of staple foods during periods of crises. Each of these provides the opportunity for better policymaking using reliable and accurate data.
    Date: 2019
  4. By: Beckmann,Elisabeth
    Abstract: Based on a survey of households in 10 Central Eastern European and Western Balkan countries, this paper presents new and unique evidence on which households have savings and how they save. The paper shows that the percentage of savers is low, and savings are frequently informal. Formal savings are dominated by bank savings, and participation in contractual and capital market savings is very low in comparison to high-income countries. Poor households are significantly less likely to have any savings; income also has an effect, albeit smaller, on the choice of formal versus informal savings. With a high density of bank branches in Central Eastern European and Western Balkan countries lack of physical access to banks does not explain the lack of formal savings. Lack of trust in banks reduces the probability of formal savings, especially bank savings.
    Keywords: Educational Sciences,Capital Markets and Capital Flows,Capital Flows,Non Bank Financial Institutions,Mutual Funds,Financial Literacy,Insurance&Risk Mitigation,Social Funds and Pensions
    Date: 2019–02–19
  5. By: Tom Akana
    Abstract: The Consumer Finance Institute hosted a workshop in February 2019 featuring José Quiñonez, chief executive officer, and Elena Fairley, programs director, of Mission Asset Fund (MAF) to discuss MAF’s approach to helping its clients improve access to mainstream financial markets. MAF’s signature program, Lending Circles, adapts a traditional community-based financial tool known as a rotating savings and credit association (ROSCA) to help establish or expand credit reports for participants who may not be able to do so through traditional means. Lending Circles have served more than 10,000 clients since 2007 and have expanded well beyond MAF’s core constituency in the Mission District of San Francisco. Quiñonez and Fairley discussed MAF’s approach to working with the communities it serves and shared the key successes and challenges that MAF has encountered. This paper provides an overview of the information shared in the workshop and additional research connecting Lending Circles to previous work on ROSCAs.
    Keywords: rotating savings and credit association (ROSCA); financial inclusion; credit invisibles; underserved; unbanked; fintech; financial technology
    JEL: D14 D71 D91
    Date: 2020–02–20
  6. By: Cristina Fernández
    Abstract: Con el fin de cumplir con los objetivos propuestos en esta investigación, el trabajo se estructura en cuatro secciones, la primera de las cuáles es esta introducción. La segunda sección analiza las tres amenazas mayores para el mercado laboral en Bogotá: la inactividad, el desempleo y la informalidad; estima cuáles son sus causas y sugiere políticas para controlarla. La tercera sección analiza en detalle las políticas de emprendimiento. La cuarta sección presenta las conclusiones.
    Keywords: Empleo, Emprendimiento, Mercado Laboral, Desempleo, Informalidad, Tasa de Participación Laboral, Bogotá, Employment, Entrepreneurship, Labor Market, Unemployment, Informality
    JEL: E24 E26 J21 J64
    Date: 2019–10–31

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