INEQUALITY, INFORMALITY, AND CREDIT MARKET IMPERFECTIONS

2017 ◽  
Vol 22 (5) ◽  
pp. 1184-1206 ◽  
Author(s):  
Roberto Dell'Anno
Keyword(s):  
Informal Economy ◽  
Multiple Equilibria ◽  
Optimal Level ◽  
Modeling Framework ◽  
Income Distributions ◽  
Self Employment ◽  
Macroeconomic Modeling ◽  
Formal Economy ◽  
Using Data ◽  
The Impact

This paper develops a microfounded macroeconomic modeling framework to investigate the relationship between informality and the income distribution. We show that multiple equilibria may rise if credit markets are imperfect and that there is a nondivisible entry cost in the formal economy. The theoretical analysis demonstrates that in the steady state, low levels of inequality are negatively correlated with high informality; conversely, high inequality exacerbates informality. This finding supports the hypothesis of an optimal level of inequality that minimizes the informal economy relative to the impact of other levels of inequality. However, for ordinary income distributions, changes in the level of inequality have only a slight effect on the informality rate. We calibrate the model using data on the U.S. and Mexican economies to estimate the level of inequality that minimizes the informality rate. The self-employment rate emerges as the most relevant determinant of the informality rate.

The Nonprofit Starvation Cycle: Does Overhead Spending Really Impact Program Outcomes?

2021 ◽  
pp. 089976402110574
Author(s):  
Hala Altamimi ◽  
Qiaozhen Liu
Keyword(s):  
Optimal Level ◽  
Fundamental Question ◽  
Cost Ratio ◽  
Program Outcomes ◽  
Optimal Point ◽  
Overhead Cost ◽  
Using Data ◽  
Nonprofit Arts ◽  
The Impact ◽  
Unrealistic Expectations

The nonprofit starvation cycle raises a fundamental question about the impact of overhead spending on nonprofit program outcomes and organizational effectiveness. We test this relationship using data on the U.S. nonprofit arts and cultural subsector from 2008 to 2018. Contrary to the conventional wisdom that lower overhead is better, the results of different model specifications consistently show an optimal level of overhead captured by an inverted U-shaped relationship between the overhead cost ratio and program outcomes. Increased spending on overhead can improve program outcomes up to the optimal point. Beyond this point, further spending on overhead can yield negative returns. The study contributes to correcting the unrealistic expectations surrounding overhead costs and argues for investing more in building sustainable nonprofit capacity. We discuss the implications of our findings for nonprofit charity monitors, donors, scholars, and other stakeholders concerned about nonprofit accountability and effectiveness.

When informality meets formality: evidence from China

2018 ◽  
Vol 12 (1) ◽  
pp. 184-201 ◽  
Author(s):  
Kun (Michelle) Yang ◽  
Michael J. Pisani
Keyword(s):  
Informal Economy ◽  
Institutional Environment ◽  
Geographical Location ◽  
Business Environment ◽  
Cross Sectional Survey ◽  
Cross Sectional ◽  
Content Type ◽  
Formal Economy ◽  
Structural Inertia ◽  
The Impact

Purpose This study aims to explore “what impact does competition from informal enterprises have on formal firms” within the Chinese economic and business environment. Design/methodology/approach The paper opted for an exploratory study utilizing the cross-sectional survey data “2012 China Enterprise Survey” conducted by the World Bank. The survey is composed of approximately 200 business-related questions across the spectrum of business operations. In all, 2,700 privately owned Chinese firms are included in the logistic regression analysis. Findings Results show the impact of informal firm competition upon formal firms in China are influenced by geographical location, industry sector, ownership profile, governmental ownership, online presence and the extent of obeying labor regulations or the time spent in handling the governmental regulatory environment. There is a competitive and complementary simultaneous intertwined relationship between formal and informal economy. It occurs in a formal economy not fully divorced from the structural inertia of the planned economy as it transitions to a market-based economy. Practical implications This paper extended the assumption of institutional theory and presented it as a dynamic view of the evolution of organizations. It contributes by offering a simultaneous dual relationship between the formal and informal economy. It also adds one more potential feature of populations in the population ecology theory. Originality/value This exploratory paper empirically examines the impacts of informal sector enterprises on formal sectors firms in China and proposes a dual force effect of the informal economy to the formal economy given the current Chinese institutional environment. The study also provides a platform for further research on the interactions between the formal and informal sectors in emerging markets.

scholarly journals Effectiveness of Central Bank Independence via Its Internal Characteristics

2011 ◽  
Author(s):  
Caroll H. Griffin
Keyword(s):  
Central Bank ◽  
Informal Economy ◽  
Developing Economies ◽  
Developed Countries ◽  
Central Banks ◽  
Central Bank Independence ◽  
Reserve Requirements ◽  
Formal Economy ◽  
The Impact ◽  
Macroeconomic Environment

This study examines central bank independence in developing countries of Latin America and Asia as well as selected developed countries. Many countries around the world, both developed and developing, have accepted the idea of central bank independence over the last several decades, so central banks have autonomy. A majority of studies has examined primarily the impact of central bank independence on inflation as promoting the theoretical benefits of a more stable and prosperous macroeconomic environment. However, there is only now sufficient data to empirically determine whether these claims are true. This research attempts to answer why developing economies with an informal sector resort to inflationary measures to finance their activities; how does a government induce an agent to choose the formal economy. In the trade-off between inflation and reserve requirements, the optimal policy is maximum inflation and minimum reserve requirements as increasing the steady-state utility of an optimizing agent. Also agents prefer the informal economy if policy relies on a maximum reserve requirement.  

scholarly journals The Costs of Involuntary Job Loss: Impact on Workers' Employment and Earnings

2013 ◽  
Author(s):  
Sylvia Dixon ◽  
David C. Maré
Keyword(s):  
Job Loss ◽  
Displaced Workers ◽  
Involuntary Job Loss ◽  
Self Employment ◽  
Percentage Points ◽  
Using Data ◽  
One Year ◽  
Annual Earnings ◽  
Matched Comparison ◽  
The Impact

This paper examines the impact of involuntary job loss on the employment and earnings of affected workers, using data from the Survey of Families, Incomes and Employment (SoFIE) for the 2002–09 period. It focusses on employees who had been working in their job for at least one year before the job loss. The impact of displacement is estimated by using a propensity score matching approach to select similar non-displaced workers and compare their employment and earnings with those of displaced workers. We find that the employment rate of displaced workers was on average 27 percentage points lower 0–1 years after displacement, 14 percentage points lower 1–2 years after, and 8 percentage points lower 2–3 years after, than that of the matched comparison group. The average wage of re-employed displaced workers was 12 percent lower 0–1 years after displacement, 11 percent lower 1–2 years after and 7 percent lower 2–3 years after. Other impacts include increases in unemployment and self-employment, reductions in average weekly hours, and reductions in weekly and annual earnings.

scholarly journals Measuring the informal economy in South Africa

2015 ◽  
Vol 8 (1) ◽  
pp. 92-101 ◽  
Author(s):  
S Saunders ◽  
E Loots
Keyword(s):  
South African ◽  
Informal Economy ◽  
Economic Activity ◽  
Economic Policies ◽  
Policy Makers ◽  
Formal Economy ◽  
Currency Demand ◽  
Policy Measures ◽  
Currency Demand Approach ◽  
The Impact

Measuring the size of the South African informal economy has received inadequate attention, making it difficult for policy-makers to assess the impact of policy measures to stimulate informal economic activity. This article aims to estimate the size of the informal economy by using the Currency Demand Approach.  The empirical results reveal that the informal economy as a percentage of GDP decreased from 1967 to 1993, before levelling off.  The growth in the informal econmy has also underperformed in comparison to formal economic growth. There appears to be a causal relationship running from the informal to the formal economy. Macro-economic policies aimed at the formal economy will not necessarily 'trickle down' to the informal, while these polcies aimed at the informal economy may have a profound effect on the formal economy.

scholarly journals The labour market impact of COVID-19 lockdowns: Evidence from Ghana

2021 ◽  
Author(s):  
Simone Schotte ◽  
Michael Danquah ◽  
Robert Darko Osei ◽  
Kunal Sen
Keyword(s):  
Labour Market ◽  
Informal Economy ◽  
Negative Impact ◽  
Small Business Owners ◽  
Market Outcomes ◽  
Self Employment ◽  
Extensive And Intensive Margins ◽  
Labour Market Outcomes ◽  
And Control ◽  
The Impact

In this paper, we provide causal evidence of the impact of stringent lockdown policies on labour market outcomes at both the extensive and intensive margins, using Ghana as a case study. We take advantage of a specific policy setting, in which strict stay-at-home orders were issued and enforced in two spatially delimited areas, bringing Ghana’s major metropolitan centres to a standstill, while in the rest of the country less stringent regulations were in place. Using a difference-in-differences design, we find that the three-week lockdown had a large and significant immediate negative impact on employment in the treated districts, particularly among workers in informal self-employment. While the gap in employment between the treated and control districts had narrowed four months after the lockdown was lifted, we detect a persistent nationwide impact on labour market outcomes, jeopardizing particularly the livelihoods of small business owners mainly operating in the informal economy.

A floor to exploitation? Social economy organizations at the edge of a restructuring economy

2016 ◽  
Vol 31 (5) ◽  
pp. 782-799 ◽  
Author(s):  
M. Anne Visser
Keyword(s):  
Working Conditions ◽  
Informal Economy ◽  
Social Economy ◽  
The United States ◽  
Employment Outcomes ◽  
Improve Working ◽  
Regulatory Capacity ◽  
Social Economy Organizations ◽  
Using Data ◽  
The Impact

Despite research documenting social economy organizations (SEOs) as important labour market intermediaries in the informal economy, the impact of these organizations on employment outcomes experienced by workers engaged in these labour markets is relatively unknown. This article analyses the impact of day labour worker centres on employment outcomes experienced in the informal day labour economy of the United States. Using data from the National Day Labour Survey, findings indicate that these organizations improve working conditions for day labourers and suggest the potential for SEOs to regulate employment processes within the informal economy. However increasing the regulatory capacity of SEOs will require addressing larger political and socioeconomic contexts in which the informal economy is embedded.

scholarly journals The Path to Sustainable Development through the Splitting of the Foreign Exchange Reserves

2016 ◽  
Vol 6 (2) ◽  
pp. 97
Author(s):  
Andrew Lewis
Keyword(s):  
Economic Growth ◽  
Sustainable Development ◽  
Foreign Exchange ◽  
Informal Economy ◽  
Positive Relationship ◽  
Statistical Data ◽  
Foreign Exchange Reserves ◽  
Formal Economy ◽  
The Impact ◽  
Formal And Informal Sectors

<p>This paper presents a theoretical equation that when used shows the impact that the foreign exchange reserves have on the overall health of an economy such as the case with Jamaica. The equation also has variables that demonstrate this case assuming no “official and unofficial” or “formal and informal” sectors. If there is a definitive split between both sectors so that the unofficial economy can make an impact on the formal economy, the splitting of the reserves can provide support for the “informal economy” as this sector can catalyze the formal economy potentially providing higher economic growth. It is shown through statistical data that the correlation can have an impact if the economy is split in two to show the positive relationship this can have on the Jamaican economy as a whole.</p>

Work in Times of Slavery, Colonialism, and Civil War: Labor Relations in Angola from 1800 to 2000

2014 ◽  
Vol 41 ◽  
pp. 363-385 ◽  
Author(s):  
Jelmer Vos
Keyword(s):  
Nineteenth Century ◽  
Informal Economy ◽  
Rural Population ◽  
Urban Population ◽  
Labor Relations ◽  
Labor History ◽  
Colonial Rule ◽  
Subsistence Farming ◽  
Self Employment ◽  
The Impact

AbstractIn Angola, a trend towards labor commodification, set in motion under the impact of the nineteenth-century produce trade and colonial rule, has been reversed in the decades since independence. Angolans have always worked mainly in the reciprocal sphere, but with the growing commercialization of the economy after the abolition of the slave trade, self-employment has also become a constant in Angolan labor history. By 2000, the rural population was thrown back to subsistence farming, while the larger part of the urban population has tried to survive by self-employment in the informal economy. Wage labor, widespread under colonialism, has become less common.

Accent Policy and Accent Modification Enterprises as Potential Indicators of Intercultural Power Relations: A Call for an Updated Research Agenda

2013 ◽  
Vol 3 (1) ◽  
pp. 22-33 ◽  
Author(s):  
Brynne D. Ovalle ◽  
Rahul Chakraborty
Keyword(s):  
International Relations ◽  
Identity Construction ◽  
Social Theory ◽  
Power Relations ◽  
Linguistic Diversity ◽  
Cultural Organization ◽  
Using Data ◽  
The Individual ◽  
The Impact ◽  
The Relationship

This article has two purposes: (a) to examine the relationship between intercultural power relations and the widespread practice of accent discrimination and (b) to underscore the ramifications of accent discrimination both for the individual and for global society as a whole. First, authors review social theory regarding language and group identity construction, and then go on to integrate more current studies linking accent bias to sociocultural variables. Authors discuss three examples of intercultural accent discrimination in order to illustrate how this link manifests itself in the broader context of international relations (i.e., how accent discrimination is generated in situations of unequal power) and, using a review of current research, assess the consequences of accent discrimination for the individual. Finally, the article highlights the impact that linguistic discrimination is having on linguistic diversity globally, partially using data from the United Nations Educational, Scientific and Cultural Organization (UNESCO) and partially by offering a potential context for interpreting the emergence of practices that seek to reduce or modify speaker accents.

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