Informality in developing economies: Regulation and fiscal policies

Charlot, Olivier; Malherbet, Franck; Terra, Cristina

doi:10.1016/j.jedc.2014.09.031

Cited by 49 publications

(47 citation statements)

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“…A worker's employment/unemployment choices are therefore based on the comparisons between his/her expected job values in the current or all the prospective jobs i.e in any of the three employment sectors. There have been recent attempts to include within the DMP model an informal sector (such as Albrecht et al (2009), Meghir et al (2015), Bosch and EstebanPretel (2012), Charlot et al (2013Charlot et al ( , 2014 and Charlot et al (2015)) or a public sector and an unsegmented private sector (such as Burdett (2012) , Postel-Vinay et al (2016)). In this paper, we aim to add both an informal and a public sector to the Mortensen and Pissarides (1994) model, with jobto-job transitions towards the public sector 7 .…”

Section: Introductionmentioning

confidence: 99%

Informality, public employment and employment protection in developing countries

Yassin

Langot

2018

Journal of Comparative Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Informality, Public Employment and Employment Protection in Developing Countries SEPTEMBER 2017Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but IZA takes no institutional policy positions. The IZA research network is committed to the IZA Guiding Principles of Research Integrity. The IZA Institute of Labor Economics is an independent economic research institute that conducts research in labor economics and offers evidence-based policy advice on labor market issues. Supported by the Deutsche Post Foundation, IZA runs the world's largest network of economists, whose research aims to provide answers to the global labor market challenges of our time. Our key objective is to build bridges between academic research, policymakers and society. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.Schaumburg-Lippe-Straße 5-9 53113 Bonn, Germany Phone: +49-228-3894-0 Email: publications@iza.org www.iza.org IZA -Institute of Labor Economics DISCUSSION PAPER SERIESIZA DP No. 11014 sectors. It becomes more profitable for workers to search on-the-job, in order to move to these more attractive and more stable types of jobs. The public sector therefore acts as an additional tax for the formal private firms. Using data on workers' flows from Egypt, we show empirically and theoretically that the liberalization of labor markets plays against informal employment by increasing the profitability, and hence job creations, of formal jobs. The latter effect is however dampened or even sometimes nullified by the increase of the offered wages in the public sector observed at the same time. Informality, Public Employment and Employment Protection in Developing Countries SEPTEMBER 2017 Shaimaa Yassin University of Lausanne (DEEP) and University of Le Mans (GAINS-TEPP) François Langot University of Le Mans (GAINS-TEPP, IRA), Paris School of Economics JEL Classification:E24, E26, J60, J64, O17

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Section: Introductionmentioning

confidence: 99%

Informality, public employment and employment protection in developing countries

Yassin

Langot

2018

Journal of Comparative Economics

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“…Consequently, informal labor markets reduce social protection of workers, as well as fail to comply with protection regulation for employees and minimum wage policies. This aspect generates an optimal engine for economic growth, because it allows organizations to operate in an environment characterized by low regulatory and wage costs (G. Ulyssea, 2010;Charlot et al, 2015).…”

Section: Informal Economic Sector In Developing Countriesmentioning

confidence: 99%

Economic sector, demographic composition, educational attainment, and earnings in Brazil

Amaral¹,

Faustino²,

Gonçalves³

et al. 2018

Preprint

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Brazil experienced population ageing and improvement in educational attainment between 1980–2010. Proportion of workers in the formal economic sector increased between 2000–2010. Earnings decreased from 1980 to 1991 and increased in 2000. However, earnings in the formal economic sector decreased again in 2010. We estimate associations of individual- and area-level variables with individual earnings of male workers living in urban areas in Brazil. Ordinary least squares regressions estimate variations on earnings of male workers, using the 1980–2010 Demographic Censuses. Individual independent variables include age, education, economic sector, race/color, marital status, religion, and region of residence. Contextual independent variables consider demographic, educational, and economic sector compositions by areas of residence. Considering individual-level variables, older and better educated workers have higher earnings. Workers in the formal economic sector have higher earnings than in the informal sector. For area-level variables, higher proportions of people working in the formal economic sector have positive associations with earnings. Proportions of people in age-education groups have negative associations with earnings mostly among older workers. For models by economic sector, proportions in age-education groups have higher positive coefficients in the informal sector, compared to the formal sector. Transitions in demographic, educational, and economic sector compositions are correlated with earnings. These effects generate greater economic inequality in the informal sector than in the formal sector. Our main contribution is the estimation of models about associations of individual earnings with individual and area-level variables, which can be replicated for other countries.

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“…However, as underlined by Ulyssea (2010), the trade-off between informality and employment does not exist if we consider policies that increase the value of being formal instead of reducing the value of being informal. Most of these policies are based on changes in regulation or taxation (Hopenhayn, 2004;Boeri et al, 2005;Satchi and Temple, 2009;Albrecht et al, 2009;Ulyssea, 2010;Charlot et al, 2015;Anand and Khera, 2016;Munkacsi and Saxegaard, 2017).…”

Section: Introductionmentioning

confidence: 99%

Informality over the life-cycle

Albertini

Terriau

2019

Journal of Economic Dynamics and Control

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In developing countries, informality is mainly concentrated on younger and older workers. In this paper, we propose a dual labor market theory that highlights how frictions and taxation in the formal sector as well as educational choices interact to shape the informality rate over the life-cycle. We develop a lifecycle model with search frictions, skill heterogeneities, and endogenous educational choices. We carry out a numerical analysis and show that our model reproduces remarkably well the life-cycle patterns of informality, non-employment and formal employment in Argentina. We analyze several public policies and show that an educational grant reduces both informality and non-employment and may be fully financed by the extra tax revenues generated by the increase in formal employment and wages. Lowering taxes may achieve similar results but is detrimental for the government budget, in the case of Argentina, despite increasing the base on which they are levied. AbstractIn developing countries, informality is mainly concentrated on younger and older workers. In this paper, we propose a dual labor market theory that highlights how frictions and taxation in the formal sector as well as educational choices interact to shape the informality rate over the life-cycle. We develop a life-cycle model with search frictions, skill heterogeneities, and endogenous educational choices. We carry out a numerical analysis and show that our model reproduces remarkably well the life-cycle patterns of informality, non-employment and formal employment in Argentina. We analyze several public policies and show that an educational grant reduces both informality and non-employment and may be fully financed by the extra tax revenues generated by the increase in formal employment and wages. Lowering taxes may achieve similar results but is detrimental for the government budget, in the case of Argentina, despite increasing the base on which they are levied.• JEL Classification: E26, O17, J46, J64

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Informality in developing economies: Regulation and fiscal policies

Cited by 49 publications

References 49 publications

Informality, public employment and employment protection in developing countries

Informality, public employment and employment protection in developing countries

Economic sector, demographic composition, educational attainment, and earnings in Brazil

Informality over the life-cycle

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