scholarly journals Agglomeration effects and informal firms in the internal structure of cities

2019 ◽  
Vol 27 (80) ◽  
pp. 93-107
Author(s):  
Andres Dominguez
Keyword(s):  
Developing Countries ◽  
Standard Deviation ◽  
Internal Structure ◽  
Informal Sector ◽  
Local Economy ◽  
Earthquake Risk ◽  
Formal Sector ◽  
Economic Activities ◽  
Standard Deviation Increase ◽  
Content Type

Purpose This paper aims to estimate the effect of agglomeration on the probability of being an informal firm in Cali, Colombia. Informal firms produce legal goods but do not comply with official regulations. This issue is relevant because, similar to other developing countries, the informal sector in Colombia employs more than 50 per cent of the workforce. The results of this study demonstrate that one standard deviation increase in agglomeration reduces by 52 per cent the probability of being informal. Results are consistent with the idea that informal firms benefit less from agglomeration because of legal restrictions that block the relationship with formal firms. Design/methodology/approach The objective of the present paper is to estimate the effect of agglomeration on the probability that a firm – given a location – chooses to be informal. The authors deal with endogeneity issues by using soil information related to earthquake risk, which reduces the height of buildings and therefore increases the cost of agglomeration. The analysis focuses on Cali, Colombia, where the informal sector employs 60 per cent of the workforce. The registration of economic activities is used as a criterion to identify informal firms, in such a way that the percentage of informal firms is 42 per cent. Findings The authors find that the effect of agglomeration is strongly negative. The probability of being informal diminishes by 52 per cent when agglomeration increases by one standard deviation. Results in this paper shed light on how formal firms tend to be localized in high-density commercial and industrial areas, while informal firms are localized in low-density and peripheral areas where the land for production is cheaper and where they can avoid the control of authorities. Originality/value Theory argues that spatial production externalities and commuting costs are among the main forces that shape the city’s internal structure. Externalities include effects that increase firms’ production, and therefore workers’ income, when the size of the local economy grows. The authors now have strong evidence that firms’ productivity is positively related with the volume of nearby employment. Most of the empirical findings concern firms in the formal sector and, accordingly, the literature says little about the effect of agglomeration on informal firms’ location. However, this effect is crucial for developing countries where informal work is the main option for less-educated workers facing unemployment.

scholarly journals Problems of Working Women in the Rural Informal Sector of Punjab (Pakistan)

1999 ◽  
Vol 4 (2) ◽  
pp. 89-99
Author(s):  
Karamat Ali ◽  
Abdul Hamid Abdul Hamid
Keyword(s):  
Developing Countries ◽  
Informal Sector ◽  
Working Women ◽  
Variable Structure ◽  
Policy Instrument ◽  
Small Scale ◽  
Formal Sector ◽  
Economic Activities ◽  
The One

The informal sector plays a significant role in Pakistan’s economy as well as in other developing countries. The role of the informal sector in solving the unemployment problem of Third World countries has become the focus of a conceptual and empirical debate in recent years. Most of the research takes a favourable view of this sector and suggests that it should be used as a policy instrument for the solution of the most pressing problems of developing countries, such as unemployment, poverty, income inequalities, etc. Before proceeding further, we will define the informal sector and differentiate it from the formal sector. There are various definitions, but the one given in an ILO report (1972) is generally considered the best. According to this report, informal sector activities are ways of doing things characterised by a heterogeneous array of economic activities with relative ease of entry, reliance on indigenous resources; temporary or variable structure and family ownership of enterprises, small scale of operation, labour intensive and adapted technology, skills acquired outside the formal school system, not depending on formal financial institutions for its credit needs; unregulated and unregistered units, and not observing fixed hours/days of operation.

Initial informality as an obstacle to intellectual capital acquisitions

2019 ◽  
Vol 20 (4) ◽  
pp. 472-487 ◽  
Author(s):  
Rodrigo Costamagna ◽  
Sandra Idrovo Carlier ◽  
Pedro Mendi
Keyword(s):  
Developing Countries ◽  
Latin American ◽  
Informal Sector ◽  
Intellectual Capital ◽  
Fixed Effects ◽  
Technology Licensing ◽  
Formal Sector ◽  
Firm Level ◽  
Cross Sectional ◽  
Content Type

Purpose Most developing countries are characterized by large informal sectors. A substantial proportion of firms in these countries began operations in the informal sector, eventually becoming formal. The purpose of this paper is to study whether, after formalization, firms that began operations in the informal sector are more or less likely to use intellectual capital in the form of disembodied technology licensing than firms that began operations in the formal sector. The moderating roles of being a downstream firm, age and the country’s per capita income are also analyzed. Design/methodology/approach The effect of initial informality on the probability of licensing is estimated using firm-level data from the World Bank’s Enterprise Survey, conducted in several Latin American countries in 2006–2017. Findings Formal firms that began informally are less likely to use licensed technology, suggesting the existence of long-run effects of informality. The effect of initial informality is more negative among downstream firms. Research limitations/implications The analysis uses cross-sectional data. Unobservable firm fixed effects could be controlled for using longitudinal data. Practical implications Initial informality affecting the innovation strategies of firms should be considered when designing policies that incentivize formality. Social implications If, in light of the results of this analysis, policies are designed which foster a better allocation of resources, there will be a tangible impact in the lives of many people in developing countries. Originality/value This is the first paper that analyzes the relationship between initial informality status and technology licensing, a relevant channel for the international diffusion of technology.

Mexico City street vendors and the stickiness of institutional contexts

2017 ◽  
Vol 13 (2) ◽  
pp. 119-135 ◽  
Author(s):  
Farzad H. Alvi ◽  
Jorge Alberto Mendoza
Keyword(s):  
Emerging Markets ◽  
International Business ◽  
Informal Sector ◽  
Rational Expectations ◽  
Macro Level ◽  
Formal Sector ◽  
Street Vendors ◽  
Content Type ◽  
Institutional Contexts ◽  
Micro Level

Purpose The need for a firm’s business strategy to be responsive to the institutional contexts of emerging markets is well-established in the literature. Often, however, strategic responsiveness is impeded by defining institutional contexts as country-level aggregations (macro-level) and glossing over sub-national variations (micro-level). The purpose of this paper is to investigate micro-level contexts that can defy macro-level assumptions of economic rationality. Design/methodology/approach As a research site, the motivations of street vendors in Mexico City are analyzed in terms staying in one sub-national context, the informal sector, as opposed movement to another, the formal sector. Unanticipated reluctance to move from one context to another is defined as stickiness. Findings Sub-national institutional contexts are found to be sticky, with less movement between informal and formal sectors than would have been anticipated. Unexpectedly, it is found that a significant number of street vendors prefer the hardship of the informal sector to the relative security of the formal sector. Research implications International business research makes assumptions about the growth narrative of emerging markets, often characterizing a growing middle class as a rising tide that lifts all boats. In terms of further research on adapting strategy, however, assumptions of rational expectations ought to be tempered, as demonstrated by the stickiness of the informal sector. Originality/value A contribution is made to the international business literature by showing that macro-level assumptions about institutional context based on rational expectations of wealth-maximizing behavior in emerging markets may result in an incomplete view of institutional context. Ultimately, adaptation of strategy could be impaired as a result.

Empirical Investigation of Formal and Informal Sectors in Waste Recycling of the Municipal Waste Management System of Developing Countries: The Case Study of Lagos State

2016 ◽  
Vol 7 (2) ◽  
pp. 21 ◽  
Author(s):  
Oladipupo Salau ◽  
Lalita Sen ◽  
Samuel Osho ◽  
Oluwatoyin Adejonwo-Osho
Keyword(s):  
Developing Countries ◽  
Waste Management ◽  
Informal Sector ◽  
Waste Recycling ◽  
Recycling Rate ◽  
Waste Collection ◽  
Formal Sector ◽  
Municipal Waste Management ◽  
Lagos State ◽  
Formal And Informal Sectors

Municipalities in metropolitan cities of developing countries often find it difficult to cope with the onerous task of providing waste services to their citizens due to financial constraints and poor infrastructure.  In most of these cities, waste collection services are grossly inadequate as less than half the population is served with regular and efficient waste services.  However, the shortcomings of the formal waste management system are compensated by the activities of the informal sector engaged in waste collection and make significant contributions to the MWMS through material recovery and waste recycling. In view of this, the study focuses on the roles of the formal and informal sector in municipal waste management with regards to their impacts on the recycling rate of Lagos State. In this study, we measured and compared the recycling rates between the formal and informal sectors to determine their impacts on the recycling rates of Lagos State. The study relies on primary field data, site visits and observations backed by secondary sources to investigate the range of informal sector activities in comparison to the formal sector. The findings indicate that, while both sub-sectors play significant roles in the MWMS, the informal recycling activities contribute more to the recycling rate of Lagos state than the formal sector.

scholarly journals Informality and Development

2014 ◽  
Vol 28 (3) ◽  
pp. 109-126 ◽  
Author(s):  
Rafael La Porta ◽  
Andrei Shleifer
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Economic Development ◽  
Informal Sector ◽  
Economic Activity ◽  
Organizational Form ◽  
Formal Sector ◽  
Dual Models

In developing countries, informal firms account for up to half of economic activity. They provide livelihood for billions of people. Yet their role in economic development remains controversial with some viewing informality as pent-up potential and others viewing informality as a parasitic organizational form that hinders economic growth. In this paper, we assess these perspectives. We argue that the evidence is most consistent with dual models, in which informality arises out of poverty and the informal and formal sectors are very different. It seems that informal firms have low productivity and produce low-quality products; and, consequently, they do not pose a threat to the formal firms. Economic growth comes from the formal sector, that is, from firms run by educated entrepreneurs and exhibiting much higher levels of productivity. The expansion of the formal sector leads to the decline of the informal sector in relative and eventually absolute terms. A few informal firms convert to formality, but more generally they disappear because they cannot compete with the much more-productive formal firms.

Female labour force participation: evidence from Ghana

2017 ◽  
Vol 44 (11) ◽  
pp. 1489-1505 ◽  
Author(s):  
Abena Yeboah Abraham ◽  
Fidelia Nana Akom Ohemeng ◽  
Williams Ohemeng
Keyword(s):  
Informal Sector ◽  
Rural Areas ◽  
Census Data ◽  
Labour Force ◽  
Labour Force Participation ◽  
Female Labour Force Participation ◽  
Formal Sector ◽  
Social Reforms ◽  
Female Labour ◽  
Content Type

Purpose The purpose of this paper is to examine female labour force participation (FLFP) and their employment choice between the formal and informal sectors after several institutional and social reforms such as Millennium Development Goal 3 aimed at promoting gender equality and empowerment of women by 2015, using data from Ghana’s 2010 Population and Housing Census. Design/methodology/approach In this paper, logit regression and multinomial logit techniques were employed. Findings The results show that FLFP has declined marginally from the 2005 figures; education remains the important factor in determining women’s participation in the formal sector. Strikingly 91 per cent of the FLFP is engaged in the informal sector of the Ghanaian economy, a sector with a very low contribution per head. Practical implications Interventions such as encouraging female education and retraining of self-employed females to improve upon their efficiency ought to be pursued vigorously; whiles developing rural areas for females to get equal labour opportunities and many others aimed at enhancing the efficiency and by inference earning per head of the informal sector is highly recommended. Originality/value The literature on the FLFP is thin in Ghana. The current study uses a census data unlike the previous studies and as such employed a huge sample size that reflects the reality in Ghana. The study contributed immensely to policy having established that 91 per cent of the female labour force is engaged in the informal sectors of the economy, and therefore any intervention targeting at reducing poverty and meeting the MDG 3 should be targeted at the informal sector of the Ghanaian economy.

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.

Class Differentiation and the Informal Sector in Amman, Jordan

1992 ◽  
Vol 24 (1) ◽  
pp. 27-38 ◽  
Author(s):  
Rebecca Miles Doan
Keyword(s):  
Informal Sector ◽  
Urban Poor ◽  
Formal Sector ◽  
Economic Activities ◽  
Single Class ◽  
The World ◽  
Formal And Informal Sectors

Studies of economic activities among the urban poor in various parts of the world have found more variation in the so-called informal sector than they had expected. The urban poor had typically been thought of as a kind of “reserve army” for the formal sector, an underclass at the margins of survival. Even early work that recognized the links between the formal and informal sectors lumped them together as a single class that ranked below all the others. The tendency to regard workers in the informal sector as members of an underclass masked the tremendous variations among them and between informal sectors in different places.

Labour informality may increase in Latin America

2016 ◽  
Keyword(s):  
United States ◽  
Latin America ◽  
Latin American ◽  
Informal Sector ◽  
Labour Productivity ◽  
The United States ◽  
Formal Sector ◽  
Content Type ◽  
Surplus Labour ◽  
Low Levels

Subject The informal sector in Latin America. Significance The scale of informality in Latin American labour markets is widely seen as the main reason for the region's low levels of labour productivity; consequently, policymakers seek ways to induce a transfer of labour towards the formal sector where, in addition, workers come within the tax net. However, in spite of a decade of growth in the region, levels of informality have remained stubbornly high. Impacts A reduction in informality could increase the number of taxpayers and thus revenues. Tighter migration policies in the United States could limit options for surplus labour to relocate elsewhere. Lower birth rates will slow the number of new entrants into the labour market overall.

Transition to circular economy in Brazil

2019 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Michel Xocaira Paes ◽  
Gerson Araujo de Medeiros ◽  
Sandro Donnini Mancini ◽  
Flávio de Miranda Ribeiro ◽  
Jose A. Puppim de Oliveira
Keyword(s):  
Developing Countries ◽  
Circular Economy ◽  
Urban Areas ◽  
Service Sector ◽  
Management Practices ◽  
Public Policies ◽  
Local Economy ◽  
Environmental Benefits ◽  
Municipal Solid Waste Management ◽  
Content Type

Purpose The purpose of this paper is to evaluate how improvements in municipal solid waste management systems (MSWMS) can contribute to a transition toward circular economy (CE) in urban areas, outlining actions and guidelines for public policies. Design/methodology/approach The research was carried out in three municipalities located in the state of São Paulo in terms of: diagnosis; elaboration of more positive scenarios in terms of CE and scaling of economic and environmental benefits; and outline actions and guidelines for public policies of MSWMS. Findings In developing countries like Brazil, MSWMS can contribute to a transition toward a CE through new public policies and management practices, or even through the improvement of those that already exist. Examples of this are the integration of the informal sector of the recycling chain and service sector related to repairs of clothing, shoes, furniture and electronics as well as composting at the food production site. This could be strengthened by legal and financial mechanisms, training and carbon credit projects. Moreover, there is a need for integration of public policies between different levels of governments and sectoral policies. Originality/value This paper developed a methodology to examine the potential for a transition toward a CE through the MSWMS in different scenarios and cities. This methodology allows to advance the implementation of the concept of CE in urban areas of developing countries and generating co-benefits to the local economy and the global environment.

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