nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2021‒06‒21
five papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Unfolding Trade Effect in Two Margins of Informality. The Peruvian Case By Camila Cisneros-Acevedo
  2. Informal freelancers in the time of COVID-19: Insights from a digital matching platform in Mozambique By Sam Jones; Ivan Manhique
  3. How different are necessity and opportunity firms? Evidence from a quantile analysis of the Colombian microenterprise sector By Rodriguez Torres, Omar
  4. Bailing out the Kids: New Evidence on Informal Insurance from one Billion Bank Transfers By Andersen, Asger Lau; Johannesen, Niels; Sheridan, Adam
  5. Análisis dinámico del desempleo en Bolivia mediante la Encuesta Continua de Empleo (ECE) By Angélica Calle Sarmiento

  1. By: Camila Cisneros-Acevedo
    Abstract: This paper studies the effect of an increase in import competition on informality along two margins. I consider the extensive margin, where workers are hired by unregistered employers and the intensive margin, where even though jobs are carried out in registered firms, employees are off the books. Peru's relentless informal employment and its unprecedented trade-driven growth provides an ideal case study. Using a rich household survey, I find that exposure to trade impacts on informality through two competing and contrasting mechanisms. On the one hand, extensive-informal employment declines as unregistered employers shrink or exit due to their low productivity. On the other hand, intensive-informal employment rises as registered employers reduce costs by hiring informal workers. Furthermore, results suggest that the intensive margin drives the overall effect. Hence, I find that trade liberalisation increases informality.
    Keywords: trade liberalization, labour informality, Peru
    JEL: F16 F14 J46
    Date: 2021
  2. By: Sam Jones; Ivan Manhique
    Abstract: Despite the severe negative economic shock associated with the COVID-19 pandemic, evidence from many contexts points to a surge in sales on online platforms, as well as shifts in the composition of demand. This paper investigates how the pandemic has affected both the supply of and demand for informal manual freelancers in Mozambique. Using data from the digital labour marketplace Biscate , we quantify dynamics along four main dimensions: responses to infection rates, official restrictions on activity, changes in workplace mobility, and employment conditions.
    Keywords: COVID-19, Shocks, Mozambique, Informal sector
    Date: 2021
  3. By: Rodriguez Torres, Omar (UNU-MERIT)
    Abstract: This paper explores the relationship between start-up motivation and business performance, by looking into the extent to which start-up motivation (necessity vs. opportunity) influences several business performance indicators. Using the Colombian Small and Microenterprise sector public dataset, we analyse the factors associated with microenterprise performance using a quantile regression approach to model the distribution of different measures of business performance. Among the findings, we present evidence of statistically significant differences among quantiles confirming the heterogeneity of start-up motivation and other firm characteristics of the firms operating in the sector. The results show that start-up motivation is a factor that explains the difference in the distribution of the business performance indicators under study. This findings contributes to the debate around the connection between entrepreneurship and growth in the context of developing economies. Even though firms motivated by necessity show a lower level of profit, in particular for the firms that perform relatively poorly, this is not necessarily associated with null or diminishing growth rates. Necessity is not necessarily a deterrent for growth. It needs to be understood as a means to support families that otherwise would have no income-generating opportunities.
    Keywords: Firm performance, entrepreneurship, public policy, new firms, enterprise policy
    JEL: L25 L26 J48 M13 L53 O25
    Date: 2021–04–28
  4. By: Andersen, Asger Lau; Johannesen, Niels; Sheridan, Adam
    Abstract: We combine transaction-level data from the largest retail bank in Denmark and individual-level data from government registers to study informal insurance within social networks. Accounting for transfers in cash (money transfers) and in kind (cohabitation), we estimate that family and friends jointly replace around 7 cents of the marginal dollar lost within the bottom income decile, but much less at higher income levels. We document that informal insurance covers other adverse events than income losses: expenditure shocks, family ruptures and financial distress. Parents appear to be the key providers of informal insurance with a small amount of insurance coming from siblings and virtually none from grandparents and friends. Replacement rates vary monotonically with parent economic resources.
    Keywords: altruism; Informal Insurance; private transfers; Risk Sharing
    JEL: D1 D6 G5
    Date: 2020–06
  5. By: Angélica Calle Sarmiento (Banco Central de Bolivia)
    Abstract: Este documento analiza el flujo de trabajadores entre estados de empleo (movilidad laboral) en Bolivia. La información utilizada corresponde a la Encuesta Continua de Empleo para tres oleadas de paneles, entre el 4T2015 y el 3T2018. Utilizando procesos de cadenas de Markov se estimaron matrices de probabilidades de transición para determinar la probabilidad de que los trabajadores cambien de estado de “trabaja” a “no trabaja” o viceversa además de las probabilidades de transición según categoría ocupacional. Complementariamente, se efectúa una evaluación de las transiciones entre diferentes actividades económicas. Se observó que el sector informal continúa siendo importante y que los desempleados se inclinan por participar en este sector. Asimismo, se observó una creciente participación laboral en el comercio y transporte, sectores con un elevado componente informal, lo cual respalda este resultado.
    Keywords: Cadenas de Markov, matriz de transición, Encuesta Continua de Empleo
    JEL: J23 J40 O17 O55
    Date: 2019–12

This nep-iue issue is ©2021 by Catalina Granda Carvajal. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.