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on Informal and Underground Economics |
| By: | Rafael Dix-Carneiro (Duke University); Pinelopi Koujianou Goldberg (Yale University); Costas Meghir (Yale University); Gabriel Ulyssea (University College London) |
| Abstract: | We examine the effects of international trade in the presence of a set of domestic distortions giving rise to informality, a prevalent phenomenon in developing countries. In our quantitative model, the informal sector arises from burdensome taxes and regulations that are imperfectly enforced by the government. In equilibrium, smaller, less productive firms face fewer distortions than larger, more productive ones, potentially leading to substantial misallocation. We show that in settings with a large informal sector, the gains from trade are significantly amplified, as reductions in trade barriers imply a reallocation of resources from initially less distorted to more distorted firms. We confirm findings from earlier reduced-form studies that the informal sector mitigates the impact of negative labor demand shocks on unemployment. Nonetheless, the informal sector can exacerbate the adverse real income effects of economic downturns, amplifying misallocation. Last, our research sheds light on the relationship between trade openness and cross-firm wage inequality. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2384r1 |
| By: | John T. Giles; Clement Joubert; Tanaka, Tomoaki |
| Abstract: | Low- and middle-income countries are aging rapidly but stagnation of growth in participation in pension programs, due to widespread informal employment, presents a major fiscal challenge. Some claim that improving the design of pension program rules can encourage more pension contributions, while others push for universal non-contributory pensions. This paper reviews the recent academic literature on the determinants of active participation in pension systems in high- informality settings. An emerging body of evidence shows that participation responds significantly to financial incentives as well as nonfinancial obstacles. At the same time, pensions are imperfect substitutes for other strategies to cover longevity risk, including support through the family, which will remain crucial for many older people in fiscally constrained environments. Therefore, policy makers should integrate the design of contributory pensions, social pensions, and policies that facilitate other forms of elderly support and consider how all three interact. To inform such efforts, these interactions must be more systematically investigated, and the empirical evidence must be expanded beyond a small number of middle-income countries. |
| Date: | 2025–04–24 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11105 |
| By: | Dolado, Juan J. (Universidad Carlos III de Madrid); Jáñez, Álvaro (Stockholm School of Economics); Wellschmied, Felix (Universidad Carlos III de Madrid) |
| Abstract: | Online food delivery platforms typically operate through a controversial business model that relies on subcontracting self-employed workers, known as riders. We quantify the labor-market effects of the Spanish Riders' Law in 2021 that established the presumption of dependent employment for riders using a search and matching model. Riders with heterogeneous preferences for leisure trade off work flexibility and easier employability as self-employed against enjoying higher wages as employees. Our main finding is that the reform led to a higher share of employees but failed to fully absorb the large flows of workers transiting out of self-employment and decreased riders' wages leading to welfare losses. However, complementing the reform with a payroll tax cut for platforms hiring employees preserves employment levels and increases riders' welfare. |
| Keywords: | riders, food delivery platforms, self-employed, employees |
| JEL: | J21 J60 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17740 |
| By: | Afridi, Farzana (Indian Statistical Institute) |
| Abstract: | This paper assesses the structure and quality of self-employment in India over a decade. India, historically, has had a much larger share of workers who are self-employed and a smaller proportion of wage and salaried workers. This structure of labour force participation has not shifted much in decades. In recent years, the proportion of self-employed has risen relative to the pre-pandemic era, and much more so for women. At the same time, significant underemployment accompanies low earnings of the self-employed. The paper highlights three key constraints for improving the quality of or transitioning out of self-employment – vocational skilling, access to formal credit and legal support for entrepreneurship. It concludes by discussing the implications of technological change and digitization for self-employment and the need for reforming the legal framework of self-employment in India. |
| Keywords: | quality of work, gender, trends, self-employment, India |
| JEL: | J2 J24 J31 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17842 |
| By: | Cutuli, Romina; Pérez, Inés; Garazi, Débora |
| Abstract: | This article evaluates the scope and limitations of efforts to include domestic workers in the social security and protection system in Argentina, focusing on the policies targeting the sector since the start of the COVID-19 pandemic, particularly Registradas, a program that subsidies the employment of domestic workers by middle-income employers. It shows that, while the politics implemented have improved social security coverage and labor conditions somewhat, three out of four workers continue to lack social protection, albeit to different degrees. |
| Keywords: | Trabajo Doméstico; Subsidios; Seguridad Social; Condiciones de Trabajo; Argentina; |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:nmp:nuland:4277 |
| By: | Darin Christensen; Tamma Carleton; Esther Rolf; Cullen Molitor; Shopnavo Biswas; Karena Yan; Graeme Blair |
| Abstract: | Artisanal and small-scale mining (ASM) supplies livelihoods and critical minerals but has been linked to conflict and environmental degradation. We enable monitoring of this largely informal sector by creating high-resolution maps of ASM's footprint in Africa using machine learning models that integrate geographic features and satellite imagery. We find ASM is more extensive than documented: in five countries with on-the-ground surveys, we predict over 231, 000 1-km2 grid cells [±2 standard errors: 170, 153-297, 710] contain ASM activity – over 40 times that recorded by surveyors. Adapting methods for spatial domain adaptation, we map ASM across 20 total countries, estimating that 4% [2-8%] of territory and 17% [10-30%] of the population are impacted by ASM, which encroaches on a larger share of settlements and ecosystems than previously understood. |
| JEL: | Q32 Q49 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33646 |
| By: | Ioana Botea (World Bank); Markus Goldstein (Center for Global Development); Kenneth Houngbedji (DIAL, LEDa, CNRS, IRD, Université Paris-Dauphine); Florence Kondylis (World Bank); Michael O’Sullivan (World Bank); Harris Selod (World Bank) |
| Abstract: | In settings where women’s land rights are informal, the death of a husband can severely limit a widow’s access to land and her ability to remain in her home— especially in the absence of a male heir. This paper examines whether large-scale land formalization programs can improve widows’ land access. Using data from a randomized controlled trial in rural Benin, the analysis finds that widows in villages with land formalization are more likely to stay in their homes four years after the program, with the strongest effects among those without a male heir. The paper identifies two key mechanisms: enhanced community recognition of women’s land rights and greater decision-making power over land resources. These findings highlight the potential of land formalization to strengthen women’s tenure security and promote their long-term economic stability in similar settings. |
| Keywords: | property rights, land administration, gender, widowhood, intra-household insurance |
| JEL: | D23 I31 J12 J16 O17 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:dia:wpaper:dt202503 |