Top PDF Fighting Informal Economy: Informal Labor

Fighting Informal Economy: Informal Labor

Fighting Informal Economy: Informal Labor

How reliable are the findings of the first approach and what are some of the potential sources of error? Experts from the Kosovo Agency of Statistics offer some more information on how the survey was carried out and some problems associated with it. One important factor for the Labor Force Survey conducted in Kosovo is that they had a very good reach to people in rural areas. According to experts who carried out the survey, even workers employed in the agricultural sector and subsistence level were counted as active workers (Expert from the Kosovo Agency of Statistics, personal communication, January 16, 2015). This is imperative for our calculations because the true number of all workers is a crucial part of calculating the number of undeclared workers. On the other hand, KAS experts also revealed that potential errors may occur in finding the total number of active workers when some of the surveyed subjects were inclined to declare themselves as unemployed in the hope that KAS agents will help them somehow. Although it was made very clear to all surveyed subjects that this survey is for statistical purposes only, there is a chance that some of them may have declared themselves as unemployed even if they were working. However, KAS experts were still very confident in the findings of the Labor Force Survey and they stated that this potential source of error is not high enough to effectively impact the results (Expert from the Kosovo Agency of Statistics, personal communication, January 16, 2015).
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Structural analysis of the formal and informal jobs in the Brazilian economy

Structural analysis of the formal and informal jobs in the Brazilian economy

The reorganization of the Brazilian economy, in the globalization process, has brought out changes in its productive structure, and, consequently, changes in the job market. These changes had impact on the employment at the sectoral level, with great concerns related to the labor relations and to the growing unemployment rates. In the 1990s, the change in the focus of the development strategy, from a closed protected economy to an open economy with monetary control, has originated deep changes in the labor market. The number of employed persons in the primary and secondary sector was reduced, while in the tertiary sector there was an increase in the number of jobs, but not enough to absorb all the employees released from the previous two sectors. The share of informal jobs in the Brazilian economy was around 52% in 2003. In this way, the question of employment generated by the economic sectors, in number and quality, has become a crucial issue. The goal of this work is to study the characteristics and the evolution of the occupied persons, and to relate it with the formal and informal job market, as well as the economy productive structure, using for that input-output matrices constructed for the Brazilian economy. The main results show that there was a reduction in the capacity of the economy to generate employment for every million of Reais produced in a given sector. The data also shows that despite the ratio of informal workers in the economy being superior to the workers in the formality, the formal sector was responsible for about 60% of the jobs generated in the period of analysis.
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Informal Economy, Governance, and Corruption

Informal Economy, Governance, and Corruption

In the last two decades, the Bangladesh economy has undergone structural changes with a proportionate increase of service, a declining share of agriculture in both output and employment, and an almost constant share of manufactured output and employment. In the public sector, a decline in employment growth during the 1980s resulted in the retrenchment of many workers with the implemen- tation of a structural adjustment program. The growth in agriculture at the margin has been labor displacing rather than labor absorbing (Khan 1989). This tends to push labor out of agriculture and throw it into low productivity. This is also borne of observations that due to the unavailability of jobs in the agricultural sector as well as landlessness and poverty, people come to the city hoping to find employ- ment. Both rural push and urban pull factors have played a role in the migration process. In addition to the sluggishness of the formal sector, the lack of education, skills training, and experience of rural migrants have extreme difficulty finding employment in the formal sector, and even in the "intermediate segment" 14 of the
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Labor share, informal sector and development

Labor share, informal sector and development

Many DCs experienced unprecedented increases in national income as a result of capital account openness. Many channels through which financial openness affects output growth exist in the literature. In the standard growth model, capital account liberalization works through its impact on capital accu- mulation as DCs are initially labor abundant. On the other hand, liberalization increases the quantity of capital goods that developing countries import from industrial nations (Alfaro and Hammel, 2007). If technology diffuses from developed to developing countries through the technology embodied in capital goods imports ` a la Eaton and Kortum (1999, 2001), then liberalizations may indeed drive up the growth rate of total factor productivity. In the late 1980s DCs all over the world began easing restrictions on capital inflows of all kinds, giving researchers a series of before and after experiments with which to study the impact of factor flows on productivity and factor reward. Henry (2003), Bekaert et al (2005) and Henry and Sasson (2009) show that capital account liberalization leads to an important increase in productivity and wage growth in the whole economy and in the manufacturing sector for a subset of DCs. Henry and Sasson show that during a three to five-year window following capital account liberalization, productivity growth in the manufacturing sector is 8 points higher each year than in non- liberalization periods. They show that capital account liberalization props up investment during this period 15 and as
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The Effects of Economic Sanctions on the Informal Economy

The Effects of Economic Sanctions on the Informal Economy

There are two main implications of these results. First, given that criminals do not reform easily, we can conclude that people starting criminal activities during the sanctioned period are not likely to take a job in the official labor market after the economic sanctions end. In addition, workers from the informal sector in non-criminal activities have difficulty to move to the formal sector (Nelson & De Bruijn, 2005), informality in the labor sector persists over time and it is a substitute for formal labor in many sectors (Williams & Round, 2008). Thus, it is conceivable that informal workers might not move into the formal labor markets after the sanctions are lifted. Informal workers also do not invest in their own education and in the education of their children, thus increasing the likelihood that they will find jobs only on the black labor market (Oviedo, 2009). According to Enste (2003), informality can lead to more acceptance of illegal work and thus, to a continuation of these black market activities. Thus, it is likely that the black market workers and their children are more likely to stay in the black labor markets even after the end of the sanctions. Finally, corruption exhibits a high degree of persistence (Damania, Fredriksson & Mani, 2004; Hauk & Saez-Marti 2002; Mishra 2006). Since sanctions increase corruption in target countries, we can expect that corruption will continue to be a problem in these countries long after the sanctions are lifted. Overall, it seems that sanctions could have long run effects on the targets' informal economies.
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Formal-informal economy linkages and unemployment in South Africa

Formal-informal economy linkages and unemployment in South Africa

In this paper we develop a multiregional computable general equilibrium (CGE) model that captures the observed structure of South Africa’s formal and informal economies as well as the various linkages or transmission channels connecting their different economic actors (e.g., firms, traders, government and investors). A CGE model is a system of equations that describes the functioning or behavior of an entire real economy (i.e., it covers all sectors, institutions and markets). The parameters of the CGE equations are calibrated to observed data from a social accounting matrix (SAM). A SAM is an economywide database that accounts for all monetary flows in an economy within a specific year. It reconciles a wide range of data sources, including national accounts, household income and expenditure surveys, and labor force surveys. Our analysis therefore required the construction of both a specialized South African formal-informal model (SAFIM) and an accompanying SAM. The mathematical specification of SAFIM is included in the appendix. This section presents a conceptual framework of the model and discusses its structure and core assumptions.
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CONSEQUENCES OF INFORMAL ECONOMY: A CASE OF ALBANIA

CONSEQUENCES OF INFORMAL ECONOMY: A CASE OF ALBANIA

Licensed under Creative Common Page 365 the size of the economy the informal, and changes the course of the industry in the market, changing demand for labor in a way that expands the negative effects on the job market and focus on the effects of less skilled. They also describe the conditions where least squares regression provides unbiased estimates of the overall impact of taxes and indirect effects that include government spending and tax revenues. Regressions for samples of rich countries in the mid-1990s show that the standard deviation of the tax rate is by 12.8 percentage points to 122 fewer hours of work per adult per year in the market, a decrease of 4.9 percentage points in relation to employment population, and an increase in the informal economy 3.8 percent of GDP. This also leads to employment lower at 10 to 30 percent as it leads to added value stock in (a) the retail trade and repairs, (b) the food, drinks and accommodation, and (c) a wider group industry which includes wholesale trade.
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Taxation, credit constraints and the informal economy

Taxation, credit constraints and the informal economy

This paper analyzed the effects of taxation and credit market frictions on occupational choice, aggregate efficiency and income inequality, in an environment where a large fraction of output is produced in the informal sector. In particular, we extended the model of Evans and Jovanovic (1989) to consider two sectors: the formal sector, in which entrepreneurs have limited access to credit markets and must pay taxes; and the informal sector, in which entrepreneurs can evade the payment of taxes, but have to rely exclusively on their wealth to finance their capital. Individuals are heterogeneous in their wealth and entrepreneurial talent, and decide between three occupations: wage worker, entrepreneur in the formal and entrepreneur in the informal sector. In addition, the informal sector is both less productive and more labor intensive than the formal sector.
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Modeling the Informal Economy in Mexico  A Structural Equation Approach

Modeling the Informal Economy in Mexico A Structural Equation Approach

1) Direct Methods: These methods refer to government surveys or tax audits and are the only ones officially accepted, although this does not mean that they are reliable sources, since informal agents are not necessarily incentiveted to cooperate reporting the true in this type of surveys. So, as usual, the real value is always above the survey results. In the Mexican case, the National Statistics Institute (INEGI 7 ) in cooperation with the Secretary for Labor and Social Prevension (STPS 8 ) carries out regular surveys on the so called microbusinesses (firms comprising a maximum of 15 persons) in an attempt to capture the size of informality. These surveys are called ENAMIN 9 and include businesses working in industrial production, commerce, services and transports, as well as self employed persons.
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Extortion and Informal Sector in a Small Open Economy

Extortion and Informal Sector in a Small Open Economy

There are three goods X, Y and Z produced in the neo-classical framework using four factors such as skilled labor (S), unskilled labor (L) and two types of capital (K and T). Capital is perfectly mobile across X and Y but T is specific to Z. S is specific to X and gets Ws as wage. L is mobile between Y and Z. Laborers are unionized in Y. They get as their wage. K gets identical return r across X and Y while T gets R in Z. Who are not fortunate enough to work in Y, have to go out of the formal segment. Because of their livelihood they need to find out alternative workplace. This is provided by the production of Z. However, Z can not be produced by these two factors only. It requires the service of another factor that actually negotiates between producers and administrators since Z is not permitted to be produced legally. But if Z is never produced some labor must remain unemployed and they will not survive. Therefore Z is a necessary for a perfectly competitive full employment framework. Nonetheless, producers of Z need to comply with some institutional and political menace as it is an extra-legal, if not illegal, activity. To combat such menace producers obtain service of intermediaries who actually watch out for these institutional perils. Intermediaries are unproductive in that no additional output is produced by them. Their marginal productivities in terms of the volume of goods are zero though they get positive return for their work. However, without such an arrangement production of Z could not have taken place. We call this sector Z as an informal sector.
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Whether or not the informal economy as an engine for poverty alleviation in Vietnam

Whether or not the informal economy as an engine for poverty alleviation in Vietnam

With respect to the pessimistic point of view, the informal sector consists of marginal and subsistence activities, where the productivity and earnings of its participants remain low. Informal workers enjoy little social protection, and working conditions are very poor (ESCAP, 2006). Therefore, the informal sector perpetuates poverty and the effect of informality on poverty reduction is negative. In addition, Crotty (2009) finds that the high incidence of informal employment in the developing world creates poverty traps for workers and suppresses the ability of developing countries to benefit from trade. He explains that informal employment makes it difficult for workers to acquire formal generic skills while companies operating in the informal sector tend to be too small to support innovation and value creation or to be able to exploit economies of scale. In addition, Timofeyev (2013) uses the latest available data from Russian Federal State Statistics Service to calculate the scales of labor income of the poor in the informal sector then makes a comparison with average wages in the formal sector and the official poverty line. The study concludes that the informal sector is a factor of social stability in a post socialist transition economy, which, however, cannot alleviate poverty.
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On the Political Economy of the Informal Sector and Income Redistribution

On the Political Economy of the Informal Sector and Income Redistribution

If the distribution of incomes is skewed enough (to the right), high redistribution with large informal sector will still be an appealing alternative when we allow the decisive voter to be richer, as seen in the fi rst three columns. However, after a certain percentage, the amount of rich people in the economy decline so radically that the cuts in taxes are equally large. Since there is no change in the pro fi tability in the informal sector to compensate for the loss in redistribution, we do not observe an increase in its size. When coupled with a suitable wage distribution, the type of political regime acts to reduce the size of welfare transfers much faster than the equivalent reduction in the informal sector. Hence, a political system that is hostile to the poor can work to impede the positive effects of economic growth. This is apparent in Loayza’s (1994) observation that ’informal employment declines in importance as the general level of development rises’ However, it remains large even in high-income developing countries, in which it employs 31% of the labor force” (p.2). Table 3. summarizes the fi ndings across USA and two different political regimes in Mexico, while keeping the parameters of the distribution and choice variables constant as indicated in section 4. The fi rst row refers to the level of redistribution (taxes), the second is the size of the informal sector, and the thirds row is the total income in the economy.
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Housing policy in developing countries. The importance of the informal economy

Housing policy in developing countries. The importance of the informal economy

public services, and reduced uncertainty. The disadvantages include payment of property-related taxes and compliance with onerous and profit-reducing regulation. Renters too decide whether to participate in the formal or informal market, trading off lower rents and more flexible lease arrangements against reduced security of tenure and probably lower quality public services. But there are also important differences. Squatter housing entails the illegal occupation of land, which is more serious than tax evasion and non-compliance with regulation. Also, in many developing countries, the bulk of households cannot afford to live in formal housing, so that informal housing is to a larger extent housing for the poor than informal employment is employment for the poor. Thus, issues related to poverty loom larger in policy debates about informal housing than they do in debates about informal labor and product markets.
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INFORMAL ECONOMY OPERATORS AND THE CHALLENGES OF GROWTH IN OYO KINGDOM, NIGERIA

INFORMAL ECONOMY OPERATORS AND THE CHALLENGES OF GROWTH IN OYO KINGDOM, NIGERIA

Another useful way of describing the situation of informal workers and entrepreneurs is in terms of seven essential securities, which are often denied them. It includes: Labour Market Security (adequate employment opportunities through high levels of employment ensured by macroeconomic policies); Employment Security (protection against arbitrary dismissal, regulation on hiring and firing, employment stability compatible with economic dynamism); Job Security (a niche designated as an occupation or “career’, the opportunity to develop a sense of occupation through enhancing competences); Work Security (protection against accidents and illness at work, through safety and health regulations, limits on working time and so on); Skill Reproduction Security (widespread opportunities to gain and retain skills, through innovative means for Decent work and the informal economy as well as apprenticeships and employment training); Income Security (provision of adequate incomes); and Representation Security (protection of collective voice in the labor market through independent trade unions and employers’ organizations and social dialogue institutions) (ILO, 2002). Informal activities are the way of doing things, characterized by; ease of entry, reliance on indigenous resources, family ownership of enterprises, the small scale of operation, labor-intensive and adapted technology, skills acquired outside the formal school system and unregulated and competitive markets (ILO, 2002).
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An Assessment on the Relationship Between Informal Economy and Educational Level in Turkey

An Assessment on the Relationship Between Informal Economy and Educational Level in Turkey

913 Some studies emphasize the demographic and social factors affect informal sectors and education. Akturk (2005b:291) remarks that there is not sufficient employment in Turkey and especially in urban areas. But immigrants who are undereducated are going on migrating from rural to urban areas and they choose ınformal sector necessarily. Similarly Us (2006:98) shows that the social and demographic structure of Turkey raise the ınformal employment. On the other hand Ulgen and Ozturk (2007:18) remarks that educational policy is not sufficient and reformer, therefore education can’t effective in addressing the needs of labor market. Toptas (1998:82) and Yurdakul (2008:220) suggest that education which provides skill and practice will get the informal employment under control. Other studies examined illegal economy and showed that education is not effective in decreasing the illegal sector activities precisely in Turkey (See Ozsoylu, 1999). Guloglu et al. (2008:31) remarks that children who work in informal sector don’t have education and therefore they can work in illegal sector more easily. About tax moral Saracoglu (2008:19), remarks that tax compliance can increase or decrease as educational level increase. Celikkaya and Gurbuz (2008:31) examined tax compliance in Eskişehir and found that with increment of educational level, increment of favorableness about tax amnesty and its effect on informal economy is seen.
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Governance, Corruption, and the Informal Economy

Governance, Corruption, and the Informal Economy

neurs operating in the formal sector derive from their activities. This in turn in- creases the incentive to remain in the formal economy. Moreover, good institu- tions lead to a lower level of corruption and a reduction in the size of the infor- mal economy. This finding was also the conclusion reached by [9]. Their study found that institutional quality has a negative and significant effect on corrup- tion and the shadow economy. Torgler and Schneider [14], after controlling for a variety of potential factors, found that higher institutional quality leads to a smaller size of the informal economy. Enste [15] built a regulatory index to ana- lyze the relationship between regulations and the size of the shadow economy in 25 Organisation for Economic Co-operation and Development (OECD) coun- tries. He found that the labor market, product regulation, general regulation, and poor quality of institutions and administration lead to a rise of the unofficial economy.
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The size of informal economy in Pakistan

The size of informal economy in Pakistan

This is why the economists have developed a number of direct and indirect methods for estimating the size of the informal economy (see for example Schneider and Enste (2000) for detailed description of different approaches for its measurement). The direct methods are microeconomic in nature and use either voluntary survey data or the results from tax audits to get estimates of unmeasured economic activity. Voluntary surveys typically ask respondents to reveal their incomes, expenditure and labor status. This method has been criticized for its sensitivity to how the questions are posed, and its confidence in the respondents’ willingness to truthfully reveal their income. Tax audit-based measures define the magnitude of the informal economy as the difference between the income declared in tax returns and the income actually found after an audit. A potential problem in extrapolating to the national economy is that audits are usually nonrandom and, hence, may not be representative (Perry et al (2007)).
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The informal Economy as an engine for poverty reduction and development in Egypt

The informal Economy as an engine for poverty reduction and development in Egypt

The informal Economy as an engine for poverty reduction and development in Egypt Attia, Sayed Moawad.[r]

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Why do consumers purchase goods and services in the informal economy?

Why do consumers purchase goods and services in the informal economy?

The interview schedule adopts a gradual approach towards sensitive questions, commencing with attitudinal questions, then questions on the purchase of goods and services in the informal economy and finally, questions regarding the supply of informal work. Here, the participants’ responses as consumers are the focus for analysis. The first question is: have you in the last 12 months acquired (1) any goods [and (2) any services] of which you have good reason to assume that they embodied undeclared work (i.e., that the income was not completely reported to tax or social security institutions)? The second question is: From the following, what made you buy it undeclared instead of buying it on the regular market? (lower price; faster service; better quality; good or service is not available on the regular market; in order to help someone who is in need of money; as a favor amongst friends/relative/colleagues).
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Pension schemes and labor supply in the formal and informal sector

Pension schemes and labor supply in the formal and informal sector

The lack of social security contributions by both the employer and the worker (com- monly known as informality or informal employment) is one of the main characteristics of labor markets in developing countries. This feature not only has an impact on the cur- rent situation of those workers not receiving benefits such as health care, unemployment benefits, or extra transfers but also affects access to the pension system for the elderly. Since the work record allows agencies to properly enforce the requirements to obtain the pension mainly by checking the years spent in formality (contribution history), difficul- ties to meet these requirements have been noted in the academic and policy discussion (Forteza et al. 2009; Bucheli et al. 2010; Bosch and Manacorda 2012). This issue affects mainly those workers who either enter and exit the formal sector repeatedly or remain in the informal sector for many years. In the past, some workers were able to easily deceive the agencies with (false) witnesses, even if they did not meet the requirements 1 .
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