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on Informal and Underground Economics |
| By: | Nobuaki Hamaguchi (Research Institute of Economics and Business Administration, Kobe University, JAPAN); Hiroyuki Hino (Office of Global Affairs, Duke University, U.S.A. and Research Institute of Economics and Business Administration, Kobe University, JAPAN); Charles Piot (Department of Cultural Anthropology, Duke University, U.S.A.); Jiahan Yin (Graduate School of Economics, Duke University, U.S.A.) |
| Abstract: | The informal economy in Africa has been considered both the cause and result of underdevelopment, and that dichotomous understanding of the formal-informal divide, simply based on a single criterion such as whether an enterprise is registered or not, is not satisfactory. In this paper, we propose Composite Informality Index (CII) as a continuous measure of informality enclosing multiple indicators of individual enterprise. We applied multiple correspondence analysis to quantify CII. We examined whether CII has explanatory power for firm size, sales and growth, and the degree of resiliency seen in shocks received from COVID-19 and recovery from them. We found that informality is associated with a smaller size of employment and sales, consistent with stylized facts of informality. However, CII is not directly related to sales growth, rejecting the general perception of linking informality to slower business growth. A business owner-operator mindset, rather than being more or less informal, determines business growth. The informality is associated with smaller revenue loss from COVID-19 shock, suggesting informal enterprises' higher absorptive capacity. We also found that business perspectives that appreciate the full control of their own business and the flexibility to innovate, which are also linked to higher sales growth, are associated with lower informality. Our method would be particularly useful for devising policies to boost owner-operators' motivation that would help African countries to enhance the dynamism of the microenterprise sector. |
| Keywords: | MCA; Sales growth; Resiliency |
| JEL: | O17 O55 Z13 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:dp2024-13&r=iue |
| By: | Hiroyuki Hino (Office of Global Affairs, Duke University, U.S.A. and Research Institute of Economics and Business Administration, Kobe University, JAPAN); Nobuaki Hamaguchi (Research Institute of Economics and Business Administration, Kobe University, JAPAN); Charles Piot (Cultural Anthropology and African & African American Studies, Duke University, U.S.A.); Jiahan Yin (Department of Economics, Duke University, U.S.A.) |
| Abstract: | This paper attempts to gain greater clarity about an issue which has considerable bearing on economic policy in Africa yet remains poorly diagnosed: the relation between informality and dynamism among low-income micro enterprises. We begin with the premise that micro entrepreneurs are driven by non-pecuniary motives, to varying degree, and adopt informal ways of doing business when informal motivations are strong. Building on this premise, we construct a regression model in which the dynamism of microenterprises is explained by the informality of entrepreneurs' motivations and of his/her ways of doing business as well as interactions among these two informality variables. We apply the model to microentrepreneurs in Ghana, Kenya and Nigeria, with data derived from a survey conducted for this research. The regression results show that the relation between informality and dynamism is intricate. Two of the four informal business practices tested - small business size and limited bookkeeping - negatively affect business growth while the other two have no significant influence either way. On the other hand, informal motivations - represented by a composite index of non-pecuniary motivations - have a positive effect on business growth although the effect is not directly observable. When an enterprise is operated in an informal setting by an entrepreneur with strong informal motivations, the synergy between the setting and the motivation works to increase the chance of business growth. The resilience of microenterprises too is linked positively to informality although interactions between motivation and business practice tend to reduce business growth in this case. Informal motivations and informal business practices are interwoven, an insight that could help in developing policy that could strengthen informal enterprises on the continent. |
| Keywords: | Informality; Africa; Microenterprises; Growth; Resilience |
| JEL: | O55 O17 Z13 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:dp2024-14&r=iue |
| By: | Hiroyuki Hino (Office of Global Affairs, Duke University, U.S.A. and Research Institute of Economics and Business Administration, Kobe University, JAPAN); Charles Piot (Department of Cultural Anthropology, Duke University, U.S.A.); Nobuaki Hamaguchi (Research Institute of Economics and Business Administration, Kobe University, JAPAN); Lilly Brouwer (Department of Cultural Anthropology, Duke University, U.S.A.); Jiahan Yin (Department of Economics, Duke University, U.S.A.) |
| Abstract: | This paper presents findings of a large-scale survey of low-income microentrepreneurs in Ghana, Kenya and Nigeria, conducted in order to understand the informality of the microenterprise sector. The findings reveal three key outcomes. First, contrary to common belief in the literature on informality, a significant portion of low-income entrepreneurs boast high educational credentials, and their businesses exhibit substantial sales revenues, in each case surpassing national averages. Surprisingly, nearly all low-income microenterprises pay some form of tax and maintain official registration with some government agencies. Second, again contrary to assumptions often made, microenterprises do not exist in a homogeneous realm of informality. Broadly defining informality envelops almost all microenterprises, yet a more nuanced definition uncovers rich heterogeneity in the nature and depth of informality. Third, far from stagnating, many microbusinesses are vibrant, dynamic and resilient. This finding is particularly important because development economics has traditionally judged informal enterprises as low in productivity and inferior to their formal counterparts, and this has had a profoundly negative impact on government policy. Thus, conventional approaches to the study of informality demand critical reassessment and a paradigm shift in conceptualizing informality and a reinvigorated perspective on the dynamics of low-income microenterprises in Africa. |
| Keywords: | Informality; Africa; Microenterprises; Dynamism |
| JEL: | O55 O17 Z13 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:dp2024-12&r=iue |
| By: | Landini, Fabio; Rinaldi, Riccardo |
| Abstract: | The article examines the drivers of migrant atypical employment in the manufacturing sector of the Emilia-Romagna region. By drawing on administrative data based on mandatory communications we document that, even in an industry characterized by high quality of productions and occupations, migrants have a disproportionally higher likelihood to be hired through either fixed-term or agency contracts compared to natives. We interpret this evidence through a set of alternative theories, including human capital theory, dual labour market processes, the use of precarious contracts as screening devices and institutional segmentation theories. The empirical analysis reveals that while migrant employment through fixed-term contracts is consistent with screening purposes, the hiring of migrants with agency contracts is driven by processes of institutional segmentation, through which employers shift the costs of flexibility to the most vulnerable and less organized segments within the labour force, such as migrants. Managerial and policy implications are discussed. |
| Keywords: | job quality, migrant workers, manufacturing, nonstandard employment |
| JEL: | D22 J28 J41 L23 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:1409&r=iue |
| By: | Sánchez Peña, Landy; Escoto Castillo, Ana |
| Abstract: | En este documento se examina la variación del empleo que presenta un riesgo elevado de automatización de 2005 a 2020 en México. Los resultados apuntan a que la expansión de dicho empleo fue relativamente pequeña, en tanto que la composición por nivel de riesgo se mantuvo bastante estable durante ese período. Se destaca la importancia de las unidades económicas en el sector informal, el trabajo doméstico remunerado y la agricultura de autosubsistencia. Estas actividades concentran a alrededor del 35% de las personas trabajadoras y se caracterizan por estar poco integradas en la economía global y por su escasa inversión en tecnología. En un contexto de incertidumbre económica y rápida innovación, en este estudio se subraya la participación constante de las ocupaciones de bajo riesgo de automatización. Se revisan, asimismo, los pronósticos acerca del incremento de las oportunidades de empleo en las ocupaciones de baja y alta calificación, así como de la estabilización de la demanda en las ocupaciones de ingreso medio. |
| Date: | 2024–02–28 |
| URL: | http://d.repec.org/n?u=RePEc:ecr:col022:69015&r=iue |