Informal Employment in Transition Countries: Empirical Evidence and Research Challenges

Lehmann, Hartmut

doi:10.1057/ces.2014.44

Cited by 25 publications

(13 citation statements)

References 19 publications

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“…This result is in line with the stylized fact that in transition countries males engage more in informal employment than females (Lehmann, 2015). Individuals with higher education attainment are less likely to be informal.…”

Section: C) Informal Employmentsupporting

confidence: 84%

Internal Devaluation and Labor Market Outcomes: Evidence from Latvia

2017

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This paper analyzes the policy response and labor market adjustment of Latvia, which faced the most severe recession in Europe and globally. Latvia's adjustment and recovery from the 2008 economic crisis represents "a rare case study", which "has been an object of intense attention" (Blanchard et al., 2013) as country's authorities, despite many experts' recommendations, decided to maintain its currency peg and adjust through fiscal austerity and internal devaluation implementing major structural reforms. Three years later Latvia returned to a positive growth path and in 2014 joined the Euro zone. The main question in the literature is whether this adjustment represents a success story and can provide a lesson for other countries in the Euro area. We provide details on the adjustment in the Latvian labor market employing individual level data over the years 2002 to 2012. We show that with flexible labor markets, weak unions and relatively low employment protection, adjustment takes place predominantly at the extensive margin since it is driven by flows from permanent wage employment to unemployment. Underemployment constitutes another important adjustment channel, while the evidence for informal employment is more mixed. Wage regressions suggest that job mobility is not associated with increased labor productivity during and immediately after the crisis. We also identify groups particularly affected by the crisis and provide suggestions for the right mix of policy interventions.JEL Classification: J6, J21, P16.

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Section: C) Informal Employmentsupporting

confidence: 84%

Internal Devaluation and Labor Market Outcomes: Evidence from Latvia

2017

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“…A detailed discussion of the mobility patterns estimated in these papers can be found in Lehmann (2015). This discussion on worker mobility across the formal-informal divide leaves us with the impression that the jury is still out with respect to definitive statements about labor market segmentation in post-transition countries.…”

Section: Onmentioning

confidence: 98%

Informal Employment Relationships and the Labor Market: Is There Segmentation in Ukraine?

Lehmann

Pignatti

2018

SSRN Journal

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One of the most important factors that determine individuals' quality of life and wellbeing is their position in the labor market and the type of jobs that they hold. When workers are rationed out of the formal segment of the labor market against their will, i.e., the labor market is segmented, their quality of life is limited, and their wellbeing is reduced. When they can freely choose between a formal or informal employment relationship, i.e., the labor market is integrated, their wellbeing can reach high levels even in the presence of informal employment. We, therefore, test whether the Ukrainian labor market is segmented along the formal-informal divide, slicing the data by gender and age. The analysis that we perform consist in the analysis of short-term and medium-term transitions between five employment states, unemployment and inactivity. We also analyze wage gaps of mean hourly earnings and across the entire hourly earnings distribution, controlling for time-invariant unobserved heterogeneity. According to our results segmentation is present for dependent employees: for a large part of informal employees informal employment is used as a waiting stage to enter formal salaried employment and is not voluntarily chosen. As far as self-employment is concerned the evidence is mixed regarding in the Ukrainian labor market. This heterogeneity in outcomes implies that not all informal work is associated with a low quality of life and reduced wellbeing in post-transition economies.JEL Classification: J31, J40, P23

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“…While using the surveys that we have available we cannot identify informal vs. formal employment in the transition economies of Eastern Europe, other studies of informal employment in the transition economies report levels of less than 45 percent. For example, Lehmann (2015) estimates the size of informal employment in Russia at between 6 percent and 19 percent of workers (depending on the definition of "informal").…”

Section: The Extent Of Self-employment and Informal Employment Aroundmentioning

confidence: 99%

How Large are Earnings Penalties for Self-Employed and Informal Wage Workers?

Gindling

Mossaad

Newhouse

2016

IZA J Labor Develop

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This paper examines the earnings penalties and premiums associated with different types of employment in 73 countries. Workers are divided into four categories: non-professional own-account workers, employers and own-account professionals, informal wage employees, and formal wage employees. Approximately half of the workers in low income countries are non-professional own-account workers, and the majority of the rest are informal employees. Fewer than 10 percent are formal employees, and only 2 percent of workers in low income countries are employers or own-account professionals. As per capita gross domestic product increases across countries, there are large net shifts from non-professional own-account work into formal wage employment. Across all regions and income levels, non-professional own-account workers and informal wage employees face an earnings penalty compared with formal wage employees. But in low income countries, this earnings penalty is small, and non-professional own-account workers earn a positive premium relative to all wage employees. Earnings penalties for non-professional own-account workers tend to increase with gross domestic product and are largest for female workers in high income countries. On average, employers and own-account professionals earn a premium compared to employees, although there are important differences across countries and between men and women. In terms of regional differences, earnings premiums for employers and professionals are largest for men in middle income Latin American countries. On the other hand, women employers and professionals do not earn a statistically significant premium compared to employees in any region of the world. These results are consistent with compensating wage differentials and firm quasi-rents playing important roles in explaining cross-country variation in earnings penalties, and raise questions about the extent to which the unskilled self-employed are rationed out of formal wage work in low income countries.

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Informal Employment in Transition Countries: Empirical Evidence and Research Challenges

Cited by 25 publications

References 19 publications

Internal Devaluation and Labor Market Outcomes: Evidence from Latvia

Internal Devaluation and Labor Market Outcomes: Evidence from Latvia

Informal Employment Relationships and the Labor Market: Is There Segmentation in Ukraine?

How Large are Earnings Penalties for Self-Employed and Informal Wage Workers?

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