INFORMAL ECONOMY IN A DYNAMIC POLITICAL FRAMEWORK

2013 ◽  
Vol 19 (3) ◽  
pp. 578-617 ◽  
Author(s):  
Ceyhun Elgin
Keyword(s):  
Political Parties ◽  
Informal Sector ◽  
Political Party ◽  
Informal Economy ◽  
Public Capital ◽  
Formal Sector ◽  
Economy Model ◽  
Tax Rate ◽  
Formal Economy ◽  
Office Rent

I develop a dynamic political economy model with an informal sector and two political parties alternating in office. In equilibrium, if the incumbent political party faces a higher probability of staying in office, it sets a higher tax rate on the formal economy to invest more in productive public capital, while spending less for current office rent. Moreover, I argue that public capital is mainly utilized by the formal sector, and this implies that countries in which incumbent parties are more likely to stay in power have a higher tax burden but a smaller informal sector. I also present some empirical evidence that supports the main results of the model.

scholarly journals Formal Female Entrepreneurship and the Shadow Economy

2021 ◽  
Vol 13 (5(J)) ◽  
pp. 63-72
Author(s):  
Cassandra E. DiRienzo ◽  
Jayoti Das
Keyword(s):  
Informal Sector ◽  
Informal Economy ◽  
Business Models ◽  
Primary Objective ◽  
National Accounts ◽  
Formal Sector ◽  
Female Entrepreneurship ◽  
Data Set ◽  
Formal Economy ◽  
Barrier To Entry

Although female entrepreneurship yields products, markets, and business models that might not exist otherwise and are relevant to economic growth and development as well as issues related to gender equality, the factors that drive female entrepreneurship is largely understudied. The primary objective of this study is to examine the relationship between the size of a country’s informal sector and the prevalence of female entrepreneurship in the formal economy. This relationship is empirically tested using a regression analysis that employs a cross-country data set of 70 countries. The analysis results indicate a significant inverse relationship between the size of the informal sector and the prevalence of formal sector female entrepreneurship. It is argued that a larger informal economy implies a greater number of women working in the informal sector due to discriminatory barriers to the formal economy. Both formal sector entrepreneurship and work in the informal economy can lessen the barrier to entry women face related to work-life balance by allowing greater flexibility in work hours; however, employment in the informal sector is a relatively poor substitute to formal sector employment as informal sector work does not include benefits, nor is it taxed or included in official statistics. Policy recommendations for encouraging formal female entrepreneurship are made. Promoting female entrepreneurship in the formal sector not only helps to close gender, inequality gaps, but also serves to improve tax systems, lessen distortions in national accounts and official indicators, and improve the provision of public goods.

scholarly journals Informality and Economic Growth in Nigeria: 1980-2014

2017 ◽  
Vol 3 (3) ◽  
pp. 405 ◽  
Author(s):  
Mohammed Yelwa ◽  
A. J. Adam
Keyword(s):  
Economic Growth ◽  
Informal Sector ◽  
Informal Economy ◽  
Data Series ◽  
Formal Sector ◽  
Female Population ◽  
Demand Deposit ◽  
The Impact ◽  
Adf Test ◽  
The Relationship

<p><em>The paper examines the impact of informal sector activities on economic growth in Nigeria between 1980-2014. The contributions of informal sector activities to the growth of Nigerian economy cannot be over emphasized. It is the source of livelihood to the majority of poor, unskilled, socially marginalized and female population and is the vital means of survival for the people in the country lacking proper safety nets and unemployment insurance especially those lacking skills from formal sector jobs. The relationship between informality and economic growth is not clear because the sector is not regulated by the law also there is no concrete evidence that this sector enhances growth because the sector’s contributions to growth is not measured. The use of endogenous growth model becomes relevant in this study. The theory emphasizes the role of production on the long-run via a higher rate of technological innovation. The variables that were tested are official economy nominal GDP, informal economy nominal GDP, currency in circulation, demand deposit, ratio of currency in circulation to demand deposit, narrow money, informal economy as percentage of official economy. ADF test was conducted to establish that the data series of all variables are stationary t levels. Having established the stationarity test we also, conducted causality test of the response of official economy nominal GDP to informal economy nominal GDP. In conclusion, the impact of informal sector economy on economic growth in Nigeria is quiet commendable. Even though, the relationship between informality and economic growth is not straight. The paper recommended thus, the need for the government to integrate the activities of the informal economy into formal sector and size of the sector is measured and regulated because their roles are commendable. As it will improve tax collection and enhance fiscal policy.</em></p>

Neo-Dualism: Accumulation, Distress, and Proliferation of a Fissured Informality

2021 ◽  
pp. 048661342110121
Author(s):  
Kasturi Sadhu ◽  
Saumya Chakrabarti
Keyword(s):  
Informal Sector ◽  
Informal Economy ◽  
Growth Process ◽  
Jel Classification ◽  
Formal Sector ◽  
Firm Level ◽  
Macro Model ◽  
Long Run ◽  
Level Data ◽  
Firm Level Data

A dominant strand of orthodoxy argues that the problem of the informal sector could be mitigated through the capitalistic growth process. But our observations on India are different—with an expansion of the capitalistic formal sector, as the economy grows, there is a proliferation of fissured informality. Using a structuralist macro-model, we provide certain explanations for this phenomenon, which are also tested empirically using Indian subnational-state and firm-level data. Thus, we explore both the short- and long-run effects of the expansion of the formal sector on the heterogeneous informal economy. While a section of the population is pulled into the advanced informal activities, a vast segment is pushed to petty production. Accordingly, the orthodox transition narrative is questioned and alternative policy and political possibilities are introduced. JEL Classification: O11, O13, O17, P48

Expanding East African tax base will face resistance

2016 ◽  
Keyword(s):  
Informal Sector ◽  
Informal Economy ◽  
Essential Role ◽  
Budget Deficits ◽  
Formal Sector ◽  
East African ◽  
Efficient Manner ◽  
Tax Base ◽  
Member States ◽  
Content Type

Significance Member states' national budgets include plans to increase taxation of the informal economy. Governments have several reasons for broadening tax bases: budget deficits, increasing debts, donor dependency, declining revenue from the formal sector and a desire to improve services and infrastructure. Impacts Limited state resources will hinder attempts to formalise economies through enforcement alone. Incentives will play an essential role in any attempt to expand the tax base. Unless implemented in an efficient manner, taxation of the informal economy could drain government funds and hurt informal businesses. Successful taxation of the informal sector will fail unless businesses see returns in services or infrastructure.

To What Extent Can the Informal Economy Concept Adequately Explain the Dynamism of the Non-Formal Sector in Developing Countries?

2009 ◽  
Vol 10 (1) ◽  
pp. 1-19 ◽  
Author(s):  
Nazia Habib-Mintz
Keyword(s):  
Developing Countries ◽  
Informal Economy ◽  
Academic Discourse ◽  
Formal Sector ◽  
Formal Economy ◽  
Income Generating Activities ◽  
Developed Nations ◽  
Economic Income

The informal economy exists in both developing and developed nations, though it is most often associated as an engine of economic dynamism in developing countries. The concept is generally defined as the sum of economic income generating activities outside of the formal economy, which are registered, tax paying and legal. Since the 1970s when the term first entered academic discourse, the informal economy conceptually evolved through several distinct phases starting with neoliberal, then to reformist and next structuralist ideology before the term outgrew its usefulness in the 1990s and turned into operate outside of the formal economy. This paper argues that the discourse of the informal economy remains inadequate and ill-defined lemma on mainstreaming the informal economy.

Informal Economies

2021 ◽  
Author(s):  
Ernest Aryeetey
Keyword(s):  
Informal Sector ◽  
Informal Economy ◽  
Poverty Reduction ◽  
New Technologies ◽  
Informal Employment ◽  
Policy Response ◽  
Economic Activities ◽  
Formal Economy ◽  
The Future ◽  
Informal Economies

The expressions, “informal economy,” “informal sector,” and “informal employment” reflect statistical terms and definitions used to describe various aspects of informality. They are the result of several decades of work to develop a framework that adequately represents the multifaceted nature of informality as it applies not only to developing countries, but also to other transition and developed economies. The informal sector is generally viewed as the set of activities of small unregistered enterprises, while informal employment refers to employment within the formal or informal sector that lacks any form of protection, whether legal or social.1 The informal economy is a broader concept that encompasses all of these elements in their different forms, including their outputs and outcomes. The many different views about the drivers and composition of the informal economy in Africa have influenced various prescriptions and policy responses. On the one hand, some have viewed informality as being inimical to investment and growth, given that the activities undertaken usually fall outside of official regulation and control. The policy response has, therefore, often been to clamp down on or formalize the activities and relationships within the informal economy. On the other hand, informality is sometimes viewed as critical for growth and poverty reduction, given that the informal economy is inextricably linked to the formal economy while also serving as an important source of livelihood for millions of people. As a result of this, some effort has recently gone into providing a more supportive environment to enhance productivity within the informal economy and minimize its inherent vulnerabilities in the last decade. In the face of increasing globalization and access to new technologies that will drive the future of work, there is concern about the future of informal economic activities. Whether new technologies lead to a decline or upscaling of the informal economy in Africa will depend on several elements. Technology will not only shape how informality in Africa is viewed, but will influence the kind of activities undertaken, its links with the formal economy, and ultimately, the public policy response, which will itself be shaped by advances in technology.

SOCIAL RESPONSIBILITY AMONG INFORMAL ENTREPRENEURS: EVIDENCE FROM MEXICO

2020 ◽  
Vol 25 (03) ◽  
pp. 2050021
Author(s):  
CRISTIAN E. VILLANUEVA ◽  
ADRIANELA ANGELES ◽  
LUZ CECILIA REVILLA
Keyword(s):  
Developing Countries ◽  
Social Responsibility ◽  
Mexico City ◽  
Informal Sector ◽  
Informal Economy ◽  
Developed Countries ◽  
Structured Interviews ◽  
Face To Face ◽  
Formal Economy ◽  
Formal Organizations

Social responsibility (SR) has been widely studied within formal organizations, especially in large companies in developed countries. However, studies about SR in the informal sector is still insufficient. Addressing this gap is relevant for developing countries where informality is becoming extensive and is growing faster than the formal economy. This research has two main objectives: (1) determine whether in an informal economy context, entrepreneurs could perform SR and (2) if it is possible to have SR, to examine critically the way informal entrepreneurs perform it. To achieve these objectives, this study conducted 50 face-to-face, semi-structured interviews with informal entrepreneurs (IEs) in Mexico City. The outcome of this research shows evidence that IEs can perform SR in an implicit form, despite their adverse and vulnerable conditions.

Natural resource wealth and the informal economy

2021 ◽  
pp. 019251212199197
Author(s):  
Robert G Blanton ◽  
Dursun Peksen
Keyword(s):  
Natural Resource ◽  
Informal Sector ◽  
Informal Economy ◽  
Economic Activity ◽  
Resource Curse ◽  
Multiple Model ◽  
Formal Sector ◽  
Spending Patterns ◽  
Resource Wealth ◽  
Natural Resource Wealth

The ‘resource curse’ associated with natural resource abundance has long been a subject of study across multiple disciplines. Though much research has focused on possible effects of resource wealth on the formal economy, little is known about how such wealth affects the informal sector, a substantial portion of global economic activity. We posit that resource windfalls directly contribute to growth in the informal economy, as investment and spending patterns associated with such revenues limit opportunities within the formal sector and thus channel more labor and businesses into the informal sector. We test these claims across a panel of over 120 countries for the period 1985 to 2012. Across multiple model specifications, we find that resource wealth growth is associated with increased informal economic activity.

scholarly journals Challenges in Transformation of Informal Business Sector towards Formal Business Sector in Nepal: Evidence from Descriptive Cross-Sectional Study

2021 ◽  
pp. 95-106
Author(s):  
Dipak Bahadur Adhikari ◽  
Preeti Gupta ◽  
Niranjan Devkota ◽  
Udaya Raj Paudel ◽  
Seeprata Parajuli
Keyword(s):  
Informal Sector ◽  
Informal Economy ◽  
Cross Sectional Study ◽  
Business Sector ◽  
Sectional Study ◽  
Cross Sectional ◽  
Formal Economy ◽  
Working Age ◽  
High Level ◽  
Formal Business

This study seeks to contribute to the empirical understanding to the transformation of informal business towards formal business in Nepal on the basis of cross-sectional data. This paper examines the preferences socio-economic and other social capital related to informal business. Various indicators were identified to understand and analyze readiness of various informal sectors from literature review of different theories. People with high level of education less prefer informal sector however, prime working age labor force were involved massively in informal sector. More than two-third respondents argued that situation is not manageable which means the informal economy is not transitional to formal economy. Majority of respondents believes that there are some administrative problems that could hinder the entrepreneurial potential and their creativity to flourish.

scholarly journals Informal Economy and Gender Inequality,

2020 ◽  
Author(s):  
Tonuchi Emmanuel Joseph ◽  
Chinedu Miracle Nevo ◽  
Chinyere Ugonwa Nwolisa
Keyword(s):  
Gender Inequality ◽  
Informal Sector ◽  
Informal Economy ◽  
Global Economy ◽  
Least Square ◽  
African Women ◽  
Formal Economy ◽  
Formal Employment ◽  
Least Square Approach ◽  
And Gender

Abstract The COVID-19 pandemic ravaging the global economy has exposed not just the dominant nature of informal sector in Africa economy but also the vulnerability of the women in the continent. Thus, this study investigates the relationship between gender inequality and growth of the informal sector in Africa. Using Generalised Least Square Approach, it was discovered that gender inequality indices such as equality between male and female in getting job in the formal economy under same or similar circumstances have significant impact in the growth of the informal economy in the continent. The study concludes that if adequate effort is not made to address the gender inequality in the continent especially in formal employment that have forced many females to informal sector employment, the objective of achieving inclusive growth and development in the continent might not be realistic. The study therefore recommends that the UN and other international organisations should compensate the African women by giving the women at least 60 percent chance in all their employment as a way of increasing the economic and political power of the women in the continent.

Sign in / Sign up

Export Citation Format

Share Document