nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2022‒03‒14
nine papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Spatial Wage Curves for Formal and Informal Workers in Turkey By Baltagi, Badi H.; Baskaya, Yusuf Soner
  2. The NAIRU and informality in the Mexican labor market By Ana Aguilar; Carlo Alcaraz; Claudia Ramírez; Cid Alonso Rodríguez-Pérez
  3. Extending pension policy in emerging Asia: An overlapping-generations model analysis for Indonesia By George Kudrna; John Piggott; Phitawat Poonpolkul
  4. Are incomes and property taxes effective instruments for tax transition? By Kodjo Adandohoin; Jean-Francois Brun
  5. Consequences of a Massive Refugee Influx on Firm Performance and Market Structure By Yusuf Emre Akgündüz; Yusuf Kenan Bağır; Seyit Mümin Cılasun; Murat Güray Kırdar
  6. Living in Rural Areas and Self-Employment By Belloc, Ignacio; Molina, José Alberto; Velilla, Jorge
  7. Políticas para enfrentar los desafíos de las antiguas y nuevas formas de informalidad en América Latina By Abramo, Laís
  8. Domination française des marchés en Afrique francophone : Le post-colonialisme à son meilleur ? By Kohnert, Dirk

  1. By: Baltagi, Badi H. (Syracuse University); Baskaya, Yusuf Soner (University of Glasgow)
    Abstract: This paper estimates spatial wage curves for formal and informal workers in Turkey using individual level data from the Turkish Household Labor Force Survey (THLFS) provided by TURKSTAT for the period 2008-2014. Unlike previous studies on wage curves for formal and informal workers, we extend the analysis to allow for spatial effects. We also consider household characteristics that would affect the selection into formal employment, informal employment, and non-employment. We find that the spatial wage curve relation holds both for formal and informal workers in Turkey for a variety of specifications. In general, the wages of informal workers are more sensitive to the unemployment rates of the same region and other regions than formal workers. We find that accounting for the selection into formal and informal employment affects the magnitudes but not the significance of the spatial wage curves for the formal and informal workers with the latter always being larger in absolute value than that for formal workers.
    Keywords: spatial wage curve, spatial weights, regional labor markets, informal labor markets
    JEL: C21 J30 J60
    Date: 2022–02
  2. By: Ana Aguilar; Carlo Alcaraz; Claudia Ramírez; Cid Alonso Rodríguez-Pérez
    Abstract: The non-accelerating inflation rate of unemployment (NAIRU) is not directly observable, and the presence of informal workers imposes an additional challenge in its estimation. In this paper, we present an estimation of the traditional NAIRU for Mexico and an alternative measure that includes informality as an indicator of labor underutilization. We find that both measures of NAIRU and the associated labor market slack indicators follow similar patterns over time. However, the slack estimated with the indicator that includes informality seems to predict inflationary pressures more accurately when the unemployment gap is close to zero.
    Keywords: unemployment, informality, NAIRU, business cycle.
    JEL: E26 E32 E52
    Date: 2022–02
  3. By: George Kudrna; John Piggott; Phitawat Poonpolkul
    Abstract: This paper examines the economy-wide effects of government policies to extend public pensions in emerging Asia - particularly pertinent given the region’s large informal sector and rapid population ageing. We first document stylized facts about Indonesia’s labour force, drawing on the Indonesian Family Life Survey (IFLS). This household survey is then used to calibrate micro behaviours in a stochastic, overlapping-generations (OLG) model with formal and informal labour. The benchmark model is calibrated to the Indonesian economy (2000- 2019), fitted to Indonesian demographic, household survey, macroeconomic and fiscal data. The model is applied to simulate pension policy extensions targeted to formal labour (contributory pension extensions to all formal workers with formal retirement age increased from 55 to 65), as well as to informal labour (introduction of non-contributory social pensions to informal 65+). First, abstracting from population ageing, we show that: (i) the first set of pension policy extensions (that have already been legislated and are being implemented in Indonesia) have positive effects on consumption, labour supply and welfare (of formal workers) (due largely to the formal retirement age extension); (ii) the introduction of social pensions targeted to informal workers at older age generates large welfare gains for currently living informal elderly; and (iii) the overall pension reform leads to higher welfare across the employment-skill distribution of households. We then extend the model to account for demographic transition, finding that the overall pension reform makes the contributory pension system more sustainable but the fiscal cost of non-contributory social pensions more than triples to 1.7% of GDP in the long run. As an alternative, we examine application of a means-tested social pension system within the overall pension reform. We show that this counterfactual reduces the fiscal cost (of social pensions) and further increases the welfare for both current and future generations.
    Keywords: Informal Labour, Population Ageing, Social Security, Taxation, Redistribution, Stochastic General Equilibrium
    JEL: E26 J1 J21 J26 H55 H24 C68
    Date: 2022–01
  4. By: Kodjo Adandohoin (CERDI - Centre d'Études et de Recherches sur le Développement International - UCA [2017-2020] - Université Clermont Auvergne [2017-2020] - CNRS - Centre National de la Recherche Scientifique); Jean-Francois Brun (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne)
    Abstract: This paper investigates second wave tax transition (transfer of tax pressure from border taxation towards domestic taxation) concerns in developing countries. It essentially focuses on the compensation effects of incomes and property taxes over international trade tax revenue losses in developing countries. Using a generalized method of moment estimator, we come to the evidence that, incomes and property taxes are poor instruments to balance trade tax revenue losses of trade liberalization in these countries. However, a mediating effect of financial development in the compensation nexus driven by corporate income taxes was found. We explain this result by the fact that the use of financial sector generates paper trails to government in order to enforce and raise corporate income taxes. Financial development may progressively crowd‐out informal sector and leads to business formalization. Surprising, we do not find any mediating effect of financial development in the compensation patterns with personal income taxes. Nevertheless, some heterogeneities were discovered. Financial development mediates the compensation patterns of personal income taxes in Latin American countries, while the effect holds on corporate income taxes in African countries. We conclude the paper by highlighting the important role of financial development in second generation tax transition concerns over developing countries.
    Keywords: Income taxes,Property tax,Developing countries
    Date: 2020–12
  5. By: Yusuf Emre Akgündüz (Yusuf Emre Akgündüz); Yusuf Kenan Bağır (Yusuf Kenan Bağır); Seyit Mümin Cılasun (Seyit Mümin Cılasun); Murat Güray Kırdar (Murat Güray Kırdar)
    Abstract: This study combines an administrative dataset of the full population of Turkish firms and the setting of the sudden mass migration of Syrian refugees to Turkey to identify the effect of migrants on firm performance and market structure. We find that economic activity increases in hosting regions, but negative implications exist for long-term productivity. As a result of the migrant shock, exiting firms expand and new firms are established; however, the resulting market structure shows less concentration. Quantitatively, a 10 percentage-point rise in the migrant-to-native ratio increases firm sales by 3.8% and the number of active firms by 5.8%, but reduces firms’ average market share by 4.1%. We further document an increase in the export volume and variety of exported products to the Middle East and North Africa (MENA) region. In addition, a decline in export prices is observed, implying a rise in the competitiveness of exporting firms. We also uncover evidence for an effect of migrants’ skills and networks on exports, as the export value and variety of products to the MENA region increase more than those to the EU region while the prices of products exported to the two regions show similar changes.
    Keywords: refugees, firm performance, market structure, sales, informality, exports, migrant business networks.
    JEL: J15 J61 F16 L11
    Date: 2022–02
  6. By: Belloc, Ignacio (University of Zaragoza); Molina, José Alberto (University of Zaragoza); Velilla, Jorge (University of La Rioja)
    Abstract: This paper examines whether workers living in rural areas are more likely to be self-employed, compared with those in urban areas. We provide evidence for 35 European countries, using the European Working Conditions Survey for the year 2015. We also study the time devoted to market work, and monthly earnings, of self-employed workers in rural and urban areas. Results show that workers in rural areas are more likely to be self-employed than workers in urban areas, although engaging in self-employment in rural areas is associated with significantly lower monthly incomes. We also report differences by welfare state regime. Self-employment is considered a key mechanism to compensate for the difficulty of developing in rural areas, and this paper shows that workers in rural areas in Europe are more likely to be self-employed, despite more challenging working conditions.
    Keywords: rural areas, self-employment, europe, earnings, work hour
    JEL: E24 L26 O18
    Date: 2022–02
  7. By: Abramo, Laís
    Abstract: El fenómeno de la informalidad en América Latina está fuertemente marcado por los ejes estructurantes de la matriz de la desigualdad social. Se trata de un fenómeno heterogéneo y multifacético en que se manifiestan las desigualdades socioeconómicas y territoriales, de género, de edad y por condición étnico-racial. Profundizar los diagnósticos sobre las características y la naturaleza de ese fenómeno, tomando en cuenta esa diversidad y heterogeneidad, es una tarea pendiente que supone la producción de datos y sistemas de información capaces de captar esas diversas dimensiones. Esa es también una condición central para el diseño e implementación de políticas capaces de enfrentar el fenómeno de la informalidad de forma más adecuada, eficiente y sostenible y avanzar hacia la ampliación de las posibilidades de inserción productiva y laboral de mayor calidad y más protegidas y hacia al cierre de las brechas de acceso a un trabajo decente. En este documento se hace un recorrido de la discusión conceptual sobre las viejas y nuevas formas de informalidad en América Latina y se profundiza el análisis de la relación entre la informalidad y los diversos ejes de la desigualdad que estructuran sus mercados de trabajo, con énfasis en la dimensión territorial y subnacional. Asimismo, a partir de ese diagnóstico, se proponen recomendaciones de políticas para avanzar hacia la formalización de la informalidad en sus viejas y nuevas formas.
    Date: 2021–11–02
  8. By: Kohnert, Dirk
    Abstract: Francophone Africa has been dominated to date by the political, economic and cultural repercussions of France’s colonial rule. A major instrument to assert France's interests was the upkeep of a common monetary policy and currency, the CFA Franc. Although this has been increasingly resented by African politicians and economists, who wanted to replace it by a West African currency (the ‘Eco’) the CFA still prevails, due to the social network of French and African political leaders, the ‘messieurs Afrique’ who benefit from the system. Controversial international discussion concentrates on questions of sovereignty and formal political and economic questions. However, the rules of the informal sector proved to be at least as crucial in structuring the CFA-zone as the institutions and policies of the formal economic sector, including its monetary institutions. For decades, for example, prices of French imports were overpriced, due to protection by tied aid and other political and cultural non-tariff barriers to trade. The cost of this rent-seeking was carried not only by the French Treasury, who guarantees the peg, but by the French and EU taxpayers, who financed budgetary bail-outs and development aid, and last, but not least, by the poorer African member countries and social strata. Although this applies strictly speaking only to the CFA zone, there are strong indicators that things haven't changed much since then for Francophone Africa in general. The repercussions of rent-seeking in Francophone Africat impact up to date negatively on economic performance. For example, growth levels have been significantly lower since two decades compared with Anglophone competitors.
    Keywords: : France, Afrique francophone, post-colonialisme, marché régulé, intérêts particuliers, capture réglementaire, politique monétaire, franc CFA, commerce international, zone de libre-échange, union douanière, études africaines
    JEL: E26 E31 E42 E52 F13 F15 F22 F35 F52 F54 L13 N17 N97 O17 R11 R58 Z13
    Date: 2022–02–19
  9. By: Journal of Social, Justice and Policy
    Abstract: Based on the results of the research conducted, even though the Covid pandemic condition which caused a decrease in the income of Micro, Small and Medium Enterprises players, they were still able to survive and were still sufficient to meet their needs. The education of the children of UMKM actors is fulfilled up to the informal sector. Adequate living conditions because it is already a permanent home. All MSME actors and their family members are registered in the BPJS program, as well as their employees are registered in the BPJS manpower program. Social interactions with family are harmonious, as well as with fellow business actors. Apart from the ability of MSMEs to maintain their economy during the COVID-19 pandemic, the authors suggest that the government be able to provide assistance that can be distributed evenly so that new and old MSMEs can compete in the future
    Date: 2021–12–31

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