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on Informal and Underground Economics |
| By: | Ali Moghaddasi Kelishomi (School of Business and Economics, Loughborough University); Roberto Nisticò (Università di Napoli Federico II, CSEF and IZA) |
| Abstract: | This paper examines how economic sanctions affect the allocation of workers across formal and informal employment. We analyse the case of the unprecedented sanctions imposed on Iran in 2012. Employing a difference-in-differences approach, we compare the probability of being employed in the informal sector before and after 2012 for workers in industries with different pre-existing exposure to international trade. Our analysis reveals that, following the sanctions, workers in industries with higher trade exposure are significantly more likely to experience informal employment compared to workers in industries with lower trade exposure. These results remain robust when accounting for potential sorting issues by using an instrumental variable approach. Our findings suggest that the sudden shock to market access caused by the sanctions might have induced a decline in firms’ productivity, especially in industries that heavily depend on imported inputs, and therefore an increase in firms’ incentives to reduce the costs by shifting their employees to the informal sector. This sheds light on an important margin of labour market adjustment through which sanctions can affect the economy of the target country. |
| Keywords: | Economic sanctions, Exposure to trade, Informal employment, Labor reallocation. |
| JEL: | E26 F16 F51 O17 |
| Date: | 2023–11–08 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:692&r=iue |
| By: | Anat Bracha; Mary A. Burke |
| Abstract: | Using eight consecutive waves of the Survey of Informal Work Participation (SIWP) spanning 2015 through 2022, we investigate informal “gig” work participation in the United States— broadly defined to include online and offline activities—and its implications for the measurement of employment. Our results suggest that employment rates among US household heads were consistently understated in the Current Population Survey (CPS). Under conservative estimates, we find that the employment-to-population ratio would have been 0.25 to 1.1 percentage points higher over the 2015–2022 period and as much as 5.1 percentage points higher under more generous estimates. Along the intensive margin, we find evidence that a significant number of informal work hours are missing from official employment surveys, partly because employed individuals do not fully report their informal hours. Comparing informal workers who are classified as employed by the CPS with those who are arguably misclassified as nonemployed, we find that the latter are, on average, older, less educated, and less likely to cite income as a motivation for gig work, and an elevated share are disabled. The data also indicate that certain types of income-earning activities, such as renting and selling, are less likely to be perceived as “work.” These results suggest ways to improve official surveys to better capture those employed in gig work and obtain a fuller picture of the labor market. |
| Keywords: | gig work; informal work; labor market; Current Population Survey; employment |
| JEL: | J21 J22 J46 J48 E26 |
| Date: | 2023–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbwp:97383&r=iue |
| By: | Ngouhouo, Ibrahim; Njoya, Loudi; Asongu, Simplice |
| Abstract: | The main objective of this paper is to contribute to in-depth literature on the relationship between growth and the informal sector in the presence of corruption. The impact of the interaction between growth and corruption on economic performance (increase or decrease of the informal sector) will be discussed. To the best of our knowledge, our paper is unique in the empirical literature because it studies the effect of the interaction between growth and corruption in the informal sector using a sample of developing countries. Our results based on the FE, system GMM, MG, AMG, and IV-2SLS for 112 countries between the 1991-2015 periods, show that growth reduces informality in the direct effect regression. Moreover, economic growth interacts with corruption and produces negative net effects up to a corruption threshold of 4.79745 when this effect is nullified. This negative net effect was found to be robust across different regional groupings and income groups except in the Middle East and North Africa (positive net effect) and high income and upper-middle-income countries (only direct effects) producing different thresholds per sample. The study recommends that policymakers should intensify their fight against corruption in their quest to reduce the size of the informal economy. |
| Keywords: | Informal sector, Growth, Corruption, Developing countries |
| JEL: | D73 F47 O10 O17 O44 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:119061&r=iue |
| By: | Adu-Gyamfi, Richard; Kuada, John; Asongu, Simplice |
| Abstract: | It is a well-established practice of many Sub-Sahara African (SSA) governments to aid entrepreneurs within both the formal and informal sectors in order to enhance their performance and growth. Unfortunately, there is no agreed method by which governments can differentiate between entrepreneurs and target them with the appropriate promotion policies. Thus, despite the good intentions, entrepreneurship policy initiatives have been incorrectly targeted, poorly implemented and without the desired results, since different entrepreneurs may require different forms of assistance. Some scholars have suggested that without a context-specific classificatory guide, policymakers are unlikely to be accurate in their assessment of the growth capabilities of prospective candidates for specific promotion initiatives and this can explain some of the policy failures. This observation has motivated the present paper. Our objective is to provide a framework that helps identify the different contextual dimensions influencing formal and informal enterprise creation processes in SSA. |
| Keywords: | entrepreneurship; formal; informal; Africa |
| JEL: | O1 O55 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:119062&r=iue |
| By: | Asmare, Fisha; Yimam, Seid; Semreab, Etsehiwot |
| Abstract: | Presumptive tax has become a popular way of taxing businesses operating in the informal sector across middle- and low-income countries. However, evidence on the unintended effects of presumptive tax systems is scant and the effects themselves are not yet clearly known. Presumptive taxation in general has been much criticised, and public outcry and complaints have emerged due to its alleged unfairness and a lack of clarity in its implementation. The case of Ethiopia is no different. It is expected that a simple imposition of the presumptive tax system to tax the informal sector without considering stylised facts in the sector would have various negative consequences, especially in terms of the repercussions on equity. This study examines the issue empirically in the case of Ethiopia and is probably the first study of its kind in the country. We explore the equity implications of the presumptive tax system to tax the informal sector in Addis Ababa, Ethiopia. We also critically evaluate income distribution among informal sector operators considering various social stratifiers such as gender. The main dataset we use to address our research questions is the informal micro enterprise (IME) survey data collected by BAN-Development Research Centre for Excellence (BAN-DRCE) in collaboration with Stichting Nederlandse Vrijwilligers (SNV) Ethiopia from Addis Ababa in 2021. Employing descriptive analysis and a representative taxpayer approach, we find that informal sector taxation using the turnover-based presumptive tax system would be both horizontally and vertically inequitable. Our analysis shows that about 44 per cent of informal sector businesses which participated in the survey earn below the minimum formal sector business income tax threshold. Most of these 44 per cent of businesses are owned by women. The plausible reasons for the inequitable taxation of the informal sector are the complexity of how the presumptive tax burden is determined, and lack of clarity on this process. Therefore, the presumptive tax system in Ethiopia requires a serious discussion that extends up to revision. |
| Keywords: | Economic Development, |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:idq:ictduk:18191&r=iue |
| By: | Burgstaller, Lilith; Doerr, Annabelle; Necker, Sarah |
| JEL: | H26 C93 E26 J22 O17 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc23:277628&r=iue |