nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2023‒05‒08
six papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Input-Trade Liberalization and Formal Employment: Evidence from Mexico By Maria Bas; Pamela Bombarda
  2. Assessment of the contribution of the unobserved economy to the macroeconomic indicators of the regions of the Russian Federation By Kiselev Sergei; Samsonov Valery; Seitov Sanat; Filimonov Ilya
  3. Training and learning on the job are two critical channels for human capital accumulation during work years. Several studies in developed countries have found that fixed-term contract (FTC) workers receive less training sponsored by their employers than open-ended contract (OEC) workers do. In contrast, FTC workers participate more actively in informal learning during their job spells. Using the PIAAC dataset for Peru as a case study, we test these two ideas and find no robust differences in training or learning across contract types. However, we find that informal workers – dependent employees without a contract – and the self-employed receive substantially less training of any type than formal workers. Further evidence from the Mexico points in the same direction, suggesting that this is a stylized fact for highly informal labor markets. These results expose a major structural weakness in emerging economies labor markets that can affect long-run growth and equity. By Miguel Jaramillo; Bruno Escobar
  4. Estimating Vacancy Stocks from Aggregated Data on Hires: A Methodology to Study Frictions in the Labor Market By Leonardo Fabio Morales; Eleonora Dávalos; Raquel Zapata
  5. The Tax Side of the Pandemic: Shifts in Compliance Attitudes and Perceptions in Rwanda By Mascagni, Giulia; Santoro, Fabrizio
  6. The local economic development effects of income transfers in South Africa. The Social Relief of Distress grant By Sophie PLAGERSON; Senzelwe MTHEMBU; Thandi SIMELANE; Khuliso MATIDZA; Anita MWANDA

  1. By: Maria Bas (Université Paris 1 Panthéon-Sorbonne, Centre d'Economie de la Sorbonne); Pamela Bombarda (Université de Cergy-Pontoise, THEMA)
    Abstract: This work investigates the role of input-trade liberalization on labor allocation between informal and formal employment in Mexico. Using individual household data for Mexico (1993-2001), we exploit exogenous input tariff changes applied to United States (U.S.) products when Mexico enters the North American Free Trade Agreement (NAFTA) in 1994. The theoretical mechanisms considered are the foreign input cost reduction that increases revenues in the formal sector and the foreign input-skilled biased channel, such that input-trade liberalization induces the reallocation of workers from informal to formal firms. Our findings confirm these mechanisms: individuals working in manufacturing industries experiencing the average reduction in input tariffs (12 percentage points) are almost 4 percent more likely to work in formal rather than informal occupations. This effect is concentrated on high-skilled workers which reinforces the input-skilled biased complementarity channel
    Keywords: informal and formal employment; trade liberalization; household data
    JEL: F12 F16 O14 J16 O17
    Date: 2023–04
  2. By: Kiselev Sergei (Department of Economics, Lomonosov Moscow State University); Samsonov Valery (Department of Economics, Lomonosov Moscow State University); Seitov Sanat (Department of Economics, Lomonosov Moscow State University); Filimonov Ilya (Department of Economics, Lomonosov Moscow State University)
    Abstract: The purpose of this article is to assess the impact of the results of unobserved economic activity on the value of the main macroeconomic indicator at the regional level in the Russian Federation – the gross regional product. The article uses the definition of the category "unobservable economy", first formally formulated in the 1993 SNA, developed by the UN Statistical Commission. Based on it, a statistical assessment of the shadow economy in the subjects of the Russian Federation from 2010 to 2020 was carried out by improving the existing methodology of Rosstat due to the fact that at the regional level, the GVA is not adjusted for operations that are not observed by direct statistical methods. The relative scales of the unobservable component were measured, i.e. its share in GRP in 80 subjects of the Russian Federation. The calculations refuted the main hypothesis that Moscow has the largest relative scale of the unobserved economy. For example, in 2020, the Sakha Republic turned out to be such a region of Russia (36.6% against the federal 13.0%).certain students were randomly included in the control group and the treatment group.
    Keywords: Unobserved economy, gross regional product
    JEL: C10 C12 C49
    Date: 2023–02
  3. By: Miguel Jaramillo (Grupo de Análisis para el Desarrollo); Bruno Escobar (Stanford University)
    Keywords: informality, on-the-job training, informal learning, development, dual labor markets
    Date: 2022–12
  4. By: Leonardo Fabio Morales; Eleonora Dávalos; Raquel Zapata
    Abstract: We develop a methodology that recovers an estimate of the average stock of vacancies using the information on aggregated hires. We show that our prediction of the vacancy stock is unbiased, and it captures well the level and the dynamics of the United States job opening positions reported in the Job Openings and Labor Turnover Survey. We use the methodology to predict vacancies in Colombia for formal and informal salaried workers; together with unemployment, we estimate Beveridge curves and matching functions by occupations, which allows us to study the nature of the efficiency, frictions, and mismatches for different occupations. We find that the formal labor market of technicians is the most inefficient of them all; this inefficiency comes from the mismatch between the abilities of the workers and the requirement of the vacancies. Reducing friction in this occupation will require education and job-oriented training policies. In contrast, the frictions in the market for unskilled workers come from informational lacks. The reductions of friction, in this case, will come from better intermediation and active search policies. **** RESUMEN: Este trabajo desarrolla una metodología de estimación del stock vacantes a partir de información de contrataciones agregadas. Mostramos que nuestra predicción es consistente en la medida que captura el nivel y la dinámica de las vacantes recolectadas en la Encuesta de Vacantes y Rotación Laboral (JOLTS) en los Estados Unidos. Como una aplicación de la metodología, el trabajo predice las vacantes en Colombia para trabajadores asalariados formales e informales. Posteriormente se estiman curvas de Beveridge y funciones de emparejamiento por ocupaciones, lo que permite estudiar la naturaleza de la eficiencia, las fricciones y los desajustes para los sub-mercados laborales de diferentes ocupaciones. Se encuentra que el mercado laboral formal de técnicos es el más ineficiente de todos; esta ineficiencia proviene del desajuste entre las capacidades de los trabajadores y el requerimiento de las vacantes. Reducir la fricción en esta ocupación requerirá políticas de educación y formación orientadas al trabajo. En cambio, las fricciones en el mercado de trabajadores no calificados provienen de carencias de información. Las reducciones de fricciones, en este caso, vendrán de mejores políticas de intermediación y búsqueda activa.
    Keywords: Vacantes, demanda laboral, fricciones, Vacancies, labor demand, labor market frictions
    JEL: J60 J63 J23
    Date: 2023–04
  5. By: Mascagni, Giulia; Santoro, Fabrizio
    Abstract: While much knowledge is being generated on the impact of the pandemic, we still know very little on its implications on taxation in lower-income countries. Yet, tax is crucial to fund crisis response and recovery, in addition to broader development plans and expanded government expenditure. This paper starts addressing this gap using an unique dataset of survey data from Rwanda. We document two significant shifts in taxpayers’ views during the pandemic: perceptions about the fairness of the tax system improve by 40 per cent, and their attitudes to compliance become more conditional on the provision of public services of sufficiently good quality. We put these results in the broader context of crisis response. We show that they are not simply linked to individual experiences of the crisis or access to relief, but they are more likely linked to generalised improvements in solidarity and patriotism.
    Keywords: Finance,
    Date: 2023
  6. By: Sophie PLAGERSON; Senzelwe MTHEMBU; Thandi SIMELANE; Khuliso MATIDZA; Anita MWANDA
    Abstract: Following the onset of COVID-19 in April 2020, this qualitative study considered the effects of the Social Relief of Distress (SRD) grant on local economies in five urban and peri-urban locations in South Africa, through the perspectives of informal traders. In a context of acute inequality, the SRD was introduced at a time of economic, health and social crisis due to the onset of COVID and measures implemented to limit its spread and was a key policy mechanism intended to ameliorate the differential effects of these measures on vulnerable groups. Key findings from the study are that:(i) widespread receipt of the SRD led to an increase in customer demand within local economies;(ii) the SRD played a redistributive role by extending a social protection mechanism to previously excluded constituencies including informal workers and unemployed youth;(iii) the SRD helped informal trader businesses survive and in some cases new businesses were initiated;(iv) the SRD supported the circulation of people, goods and money and stimulated higher transaction intensity in different sectors (food and non-food) and across value chains;(v) economic multipliers associated with the SRD included the ability to afford transport costs for traders and customers and the ability for traders to stock small items.Although the SRD could not reverse the negative impacts of COVID-19, and cannot be considered a standalone intervention, it did function as an effective shock-responsive mechanism for households and local economies. The detection of economic multipliers in a time of emergency, signals the potential for a long term intervention that could be beneficial to local economies.
    Keywords: Afrique du Sud
    JEL: Q
    Date: 2023–04–05

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