nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2023‒10‒30
six papers chosen by
Catalina Granda Carvajal, Banco de la República

  1. Transitions to and from formal employment and income dynamics: Evidence from developing economies By Mariya Aleksynska; Justina La; Thomas Manfredi
  2. Protecting Workers, Firms, and Worker-Firm Attachment During COVID-19: Economic Considerations for the Assessment of Policy Measures By Carranza, Eliana; Veuger, Stan; Weber, Michael
  3. Self-Employment Within the Firm By Vittorio Bassi; Jung Hyuk Lee; Alessandra Peter; Tommaso Porzio; Ritwika Sen; Esau Tugume
  4. The Impact of Expanding Worker Rights to Informal Workers Evidence from Child Labor Legislation By Lakdawala, Leah K.; Martínez Heredia, Diana; Vera-Cossio, Diego A.
  5. Wage labor and social inequality in Kinshasa's informal economy: A class analysis By Héritier Mesa
  6. Analysis of trends in legal regulation of employment on online platforms in the world and in Russia By Levashenko, Antonina (Левашенко, Антонина); Girich, Maria (Гирич, Мария)

  1. By: Mariya Aleksynska; Justina La; Thomas Manfredi
    Abstract: Using panel data for Indonesia, Malawi, Peru and South Africa, this paper investigates the relationship between transitions to formal employment and workers’ labour income. It shows that transiting from informal to formal employment increases the probability of improving workers’ labour income in both absolute and relative terms. However, income gains from formalisation do not accrue to all workers equally. Switching to formal employment has the greatest potential to improve the labour income of the richest workers. The chances of improving the labour income of the poorest workers through formalisation are slim. Transitions between formal and informal employment affect income gains and losses differently for men and women, older and younger workers, and workers with different levels of schooling. The effects of labour market transitions on income changes are considerably greater in magnitude than other life events such as a births, separation, or death of a partner or spouse.
    Keywords: informal employment, informality, labour market transitions, poverty
    JEL: D31 E26 I3 J46
    Date: 2023–10–06
  2. By: Carranza, Eliana; Veuger, Stan; Weber, Michael
    Abstract: Governments around the world provided various types of support to businesses and their employees affected by the by the COVID-19 pandemic, to preserve employer-employee links, organizational knowledge, and firm-specific human capital, and to facilitate the economic recovery. This note complements efforts dedicated to document jobs-related policy responses by providing an overview of some of the basic economic considerations for the design and assessment of these policy measures, with special attention to emerging economies. The authors outline a simple framework for policy assessment that accounts for the mechanisms that transmit COVID-19 shocks through the economy and the implications of the larger informal sector and fiscal constraints shared by many emerging economies. The authors then apply this framework to analyze an array of policies that have been deployed to prevent and address business failures and job losses in sectors directly or indirectly affected by the pandemic.
    Keywords: COVID-19 pandemic; labor policies; emerging economies; economic recovery; job losses; fiscal constraints.
    Date: 2023–07–26
  3. By: Vittorio Bassi; Jung Hyuk Lee; Alessandra Peter; Tommaso Porzio; Ritwika Sen; Esau Tugume
    Abstract: We collect time-use data for entrepreneurs and their workers in over 1, 000 manufacturing firms in urban Uganda. We document limited labor specialization within the firm for establishments of all sizes and argue that this is likely due to the prevalence of product customization. We then develop a general equilibrium model of task assignment within the firm, estimate it with our data, and find large barriers to labor specialization. This setting is close, in terms of aggregate productivity and firm scale, to an extreme benchmark in which each firm is just a collection of self-employed individuals sharing a production space. Given how firms are organized internally, the benefits from alleviating other frictions that constrain firm growth are muted: most African firms resemble artisanal workshops whose business model is not easily scalable.
    JEL: L23 L25 O11 O14 O17
    Date: 2023–09
  4. By: Lakdawala, Leah K.; Martínez Heredia, Diana; Vera-Cossio, Diego A.
    Abstract: We study the effects of a Bolivian law that introduced benefits and protections for child workers (who are overwhelmingly informal workers) and lowered the de facto legal working age from 14 to 10. We employ a difference-in-discontinuity approach that exploits the variation in the laws application to different age groups. Work decreased for children under 14, whose work was newly legalized and regulated under the law, particularly in areas with a higher threat of inspections. The effects appear to be driven by a reduction in the most visible forms of child work, suggesting that firms may have reduced employment of young children to minimize the risk of being inspected. In contrast, we nd that more formal channels of adjustments - such as increased costs of hiring due to the costs of complying with the new law - are unlikely to explain the overall decline in the work of young children.
    JEL: K3 K31 J08 O12
    Date: 2023–01
  5. By: Héritier Mesa
    Abstract: This article explores the social trajectories of some “informal workers” and the dynamics of inequality they highlight. The study investigates how the structure of labor relations reveal class relations and unequal social positionalities more broadly within the informal economy. The research draws from ethnographic data collected about three forms of income-generating activities in Kinshasa: street bread, second-hand clothing, and urban agriculture. While access to capital offers some the opportunity to successfully develop a profitable income-generating activity, the limited access to various forms of capital constrains many to sell their labor power—often with weakened bargaining power—to those in possession of capital. Conversely, some actors have successfully overcome the constraint of the forms of asymmetric labor relations within the informal economy and secured a relatively decent living despite their precarious position.
    Keywords: Democratic Republic of Congo; informal economy; Kinshasa; labor; social class; social inequality
    Date: 2022–09–01
  6. By: Levashenko, Antonina (Левашенко, Антонина) (The Russian Presidential Academy of National Economy and Public Administration); Girich, Maria (Гирич, Мария) (The Russian Presidential Academy of National Economy and Public Administration)
    Abstract: The subject of the study is the analysis of legal relations arising in connection with employment on online platforms, including the provision of minimum labor guarantees by the platforms, regulation of self-employment, taxation, social insurance, cab platforms and courier services. The relevance of the study stems from the fact that a number of countries, including Russia, are trying to develop approaches to regulate the application of labor law, taxation and social insurance to persons providing services or work through platforms. In addition, there are various aspects of the regulation of employment on platforms in certain sectors of platform work, in particular in the provision of cab services and courier delivery. The novelty of the study lies in the fact that the work solves the problem of creating in Russia an effective system of regulating the status of persons working through online platforms, employment on online platforms, taking into account the standards of international organizations. The purpose of the study is to formulate proposals for the extension of minimum labor guarantees (the right to work safety, to guaranteed wages not lower than the minimum wage, the right to protection against unemployment, the right to rest, etc.) to persons providing services or work through platforms, as well as to determine the criteria for the existence of labor relations with such persons, the possibility of recording the labor (insurance period) of self-employed working through platforms, social insurance and taxation, regulation of cab and courier platforms activities etc. The methodology of the study is based on the application of methods of logical, systematic and comparative analysis using Russian and foreign normative legal acts, analytical materials of competent authors and international organizations. As a result of the study proposals for the development of the regulation of employment on online platforms, as well as the status of persons employed on the platforms, based on the analysis of OECD standards and the legislation of member countries and partners of the Organization are formulated. In order to achieve the goal the following tasks are planned: - analysis of the standards of the OECD and other international organizations on the regulation of the status of persons working through platforms and platform employment on the application of labor law, tax law, social insurance law, on the regulation of cab and courier services, on the formation of statistics; - analysis of the experience of the OECD member states in regulating the status of persons working through platforms and platform employment; - analysis of legal problems in Russia related to the regulation of the status of platform workers and platform employment; - the formation of proposals for the development of legal regulation of the status of persons working through platforms and platform employment in Russia, including in terms of the adoption of response measures that affect the development of online employment. The results of the study were the development of proposals for Russia on the development of guarantees for persons employed on online platforms in terms of providing some rights similar to labor, the development of taxation and social insurance, statistical records of platform employment, providing guarantees in certain industries (cab services and courier services). The perspective of the study lies in the need to improve the Russian legislation in terms of protecting the rights of persons employed on platforms, which enter into a relationship with the platform, similar to labor.
    Keywords: employment, online platforms, labor rights, platform economy, OECD
    Date: 2022–11–11

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