nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2023‒08‒21
five papers chosen by
Catalina Granda Carvajal, Banco de la República

  1. Informal employment: what is missing from national economic recovery plans? By Siviwe Mhlana; Rachel Moussié; Sally Roever; Michael Rogan
  2. How Robust a Concept is the Informal Economy and How Large is its Scope? A Few Sketchy Comments By Philippe Adair
  3. Social protection, the COVID-19 crisis, and the informal economy: Lessons from relief for comprehensive social protection By Laura Alfers; Florian Juergens-Grant
  4. Impact of the COVID-19 pandemic on employment: Findings from national labour surveys in five Latin American countries By Martha Alter Chen; Joann Vanek
  5. Central Bank Digital Currency Adoption: A Two-Sided Model By Brandon Tan

  1. By: Siviwe Mhlana; Rachel Moussié; Sally Roever; Michael Rogan
    Abstract: Throughout 2021, fiscal stimulus packages were introduced to jump-start the COVID-19 'post-pandemic' economic recovery process. While calls for economic recovery packages that promise to 'build back better' have come from many directions, the under-allocation of recovery resources directed at workers in the informal economy threatens the recovery of livelihoods for the majority of the world's workforce. This paper analyses the economic recovery approaches of two low-income (Bangladesh and Kenya) and two middle-income (South Africa and Thailand) countries.
    Keywords: COVID-19, economic recovery, Informal economy
    Date: 2023
  2. By: Philippe Adair
    Date: 2022
  3. By: Laura Alfers; Florian Juergens-Grant
    Abstract: This paper considers the implications of COVID-19 relief measures for the building and extension of comprehensive and universal social protection systems. It highlights three key areas emerging from the crisis, which are likely to affect the shape of social protection systems moving forward. These include the contested meaning of universality, the digitization of social protection systems, and the possibilities for informal worker participation in building a more inclusive social protection.
    Keywords: Informal work, Universalism, Social protection, COVID-19
    Date: 2023
  4. By: Martha Alter Chen; Joann Vanek
    Abstract: This paper provides a comparative summary of recent national statistics from five Latin American countries on employment losses and gains during the peak COVID-19 years compared with pre-pandemic levels. As part of its work on the impact of the pandemic on informal workers, the Women in Informal Employment: Globalizing and Organizing (WIEGO) network commissioned analyses of recent national labour force data in Brazil, Chile, El Salvador, Mexico, and Peru; and undertook a separate analysis of South African data on employment losses and gains during COVID-19 (see WIDER WP 2022/40 ).
    Keywords: Informal work, Employment, COVID-19, formal sector, Informal sector, Informal economy
    Date: 2023
  5. By: Brandon Tan
    Abstract: For central bank digital currencies (CBDCs) to accomplish their intended objectives, it is necessary for both consumers to use them and for merchants to accept them. This paper develops a dynamic two-sided payments model with both heterogeneous households and merchants/firms to study: (1) The adoption of CBDC by households and firms, and (2) The impact of CBDC issuance on financial inclusion, informality, and disintermediation. Our model shows that there is a feedback loop where more households will adopt CBDC if more firms accept CBDC and vice versa -- incentivizing both households and firms will result in greater levels of take-up. Households are more likely to adopt CBDC if it is low cost, provides an attractive savings vehicle, reduces the cost of remittances, improves the efficiency of government payments, and (if accepted by merchants) offers a valuable means of payment. Firms are more likely to accept CBDC if fees are low, if there are tax exemptions or subsidies for transactions made in CBDC, and if households who prefer to make payments with CBDC make up a large share of revenue. Upon CBDC issuance, an economy can get stuck at a steady state with low CBDC adoption and small welfare gains if the features of CBDC which do not rely on merchant acceptance (remuneration, efficiency of cross border and government payments) are not sufficiently attractive, or if the households benefiting from these features make up a small share of merchant revenue. Temporary subsidies and using CBDC for government payments can spur initial take-up to transition an economy to a welfare improving steady state with high(er) CBDC usage. Greater adoption of CBDC will result in greater financial inclusion and formalization, but potentially the disintermediation of banks and card payments. Thus, there is a trade-off in designing CBDC for greater adoption. However, the gains are more likely to outweigh the risks in lower income economies with larger unbanked populations and informal sectors.
    Keywords: Central bank digital currency; financial inclusion; informality; digital money; disintermediation; two-sided market; adoption; payments
    Date: 2023–06–16

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