Bureaucratic efficiency, economic reform and informal sector

Theory and economic intuition suggest that domestic institutions influence the employment impact of economic reform, but the evidence base is thin. This paper seeks to address this by examining the extent to which differences in regional labour market flexibility shaped the impact of unanticipated economic reforms on employment in informal (unregistered) manufacturing enterprises in India (1990–2001). It employs a difference-in-differences strategy and finds that tariff reductions are not associated with significant employment shifts in informal enterprises, a finding that may be attributable to the fact that these enterprises rarely engage in international trade. However, on average and ceteris paribus, delicensing (FDI reform) is associated with statistically significant increases (increases) in informal employment and informal enterprise numbers in inflexible (flexible) labour markets. There is some evidence that the delicensing effect is attributable to increases in product market competition in delicensed industries. However, the channel underlying the result associated with FDI reform is less clear. In light of the persistent primacy of the informal sector in India and other developing economies, these findings have substantial policy relevance.

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Economic reform, informal–formal sector linkages and intervention in the informal sector in developing countries: A paradox

International Review of Economics & Finance ◽

10.1016/j.iref.2010.04.002 ◽

2010 ◽

Vol 19 (4) ◽

pp. 662-670 ◽

Cited By ~ 5

Author(s):

Hassan Arvin-Rad ◽

Arnab K. Basu ◽

Maria Willumsen

Keyword(s):

Developing Countries ◽

Economic Reform ◽

Informal Sector ◽

Formal Sector

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Foreign trade and economic reform in China, 1978–1990

10.1017/cbo9780511571930 ◽

1991 ◽

Cited By ~ 22

Author(s):

Nicholas R. Lardy

Keyword(s):

Foreign Trade ◽

Economic Reform

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What Did The Study of The Soviet Economy Contribute to Mainstream Economics?

Voprosy Ekonomiki ◽

10.32609/0042-8736-2010-3-39-55 ◽

2010 ◽

pp. 39-55

Author(s):

M. Ellman

Keyword(s):

Economic Growth ◽

Property Rights ◽

General Equilibrium ◽

Informal Sector ◽

Institutional Economics ◽

Soviet Economy ◽

General Equilibrium Theory ◽

Mainstream Economics ◽

Universal Applicability ◽

Soviet Experience

This article is an overview of the contribution made by economic Sovietology to mainstream economics. The long debate about the universal applicability of mainstream economics is reconsidered in the light of the Soviet experience. Information is provided on the contribution of the study of the Soviet economy to fields as diverse as the measurement of economic growth, institutional economics, economic administration, the economics of property rights, the economics of the informal sector, the economics of famines, the Austrian critique of general equilibrium theory, and incentives.

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