|
on Informal and Underground Economics |
| By: | Fernando Mesa |
| Abstract: | This paper constructs a trade general equilibrium model for a less developed country with three sectors. One is the informal and un-tradable sector characterized by flexible wages, while the other two sectors are tradable, export and import sectors. The model imposes a binding minimum wage over the unskilled labour and efficient wage distortions on the skilled labour. Comparative statics is driven to analyze the effects on the labour market as consequence of opening the economy, raising the minimum wage and the introduction of an augmenting productivity in the export sector. |
| Date: | 2011–08–23 |
| URL: | http://d.repec.org/n?u=RePEc:col:000092:008908&r=iue |
| By: | François Gerard (UC Berkeley); Gustavo Gonzaga (Department of Economics PUC-Rio) |
| Abstract: | Few developing countries have adopted an Unemployment Insurance (UI) program but the list of countries considering its implementation is growing. Focusing on the Brazilian UI program and using administrative data covering the universe of formal employment, we provide empirical evidence documenting two relevant facts for the debate around the design of such program in countries characterized by a large informal sector and a lack of administrative and enforcement capacity. First, UI benefits strongly affects the timing of formal job finding for those workers able to find a formal job soon after job-loss. Second, those workers constitute a small share of the overall pool of UI beneficiaries, since most job-losers do not find a formal job rapidly. Therefore, offering UI is costly (most beneficiaries would exhaust their benefits for typical lengths of benefit duration) and UI benefits have little distortionary effect on the job-finding behavior of the average (formal) job-loser: they constitute pure income transfers for 3/4 of the potential beneficiaries. We further discuss implications of these 2 facts and highlight some interactions with job protection legislations (hiring costs), the main policy instrument used to protect workers from labor demand fluctuations in those countries. |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:rio:texdis:593&r=iue |
| By: | Tonin, Mirco (University of Southampton) |
| Abstract: | This paper documents a positive correlation within European labour markets between the proportion of full-time employees with earnings on the minimum wage and the extent of underreporting of earnings in the economy. Using a simple model of a competitive labour market, I show how this correlation can emerge as a result of the common dependence of both quantities on the strength of enforcement of fiscal regulation. This suggests that a high spike in the wage distribution at the minimum wage level is, in some contexts, an issue of fiscal enforcement, more than a labour market issue. |
| Keywords: | minimum wage, spike, underreporting, lighthouse effect |
| JEL: | J38 H26 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5942&r=iue |
| By: | Yusuf Soner Baskaya; Timur Hulagu |
| Abstract: | Using individual level data from Turkstat Household Labor Force Survey for 2005-2009 period, we analyze whether there is a wage gap between formal and informal workers with comparable observable characteristics, where the formality of employment is defined with respect to individuals' registry status to compulsory Social Security System. We find that both standard Mincerian regressions and the propensity score matching exercises indicate a sizable formal employment wage premium in Turkey. This contrasts with earlier studies stating that findings on wage gap between formal and informal workers is not robust to estimation methodology. However, we find that the estimation methodology matters for the relative size of formal employment wage premium across demographic groups : While Mincerian regressions give similar estimates for formal-informal wage gap across males and females or old and young workers, the propensity score matching suggest that earning inequality due to differences in formality status is higher among females and young workers. |
| Keywords: | Formal/Informal Employment, Formal Employment Wage Premium, Propensity Score Matching |
| JEL: | C14 J30 J42 J60 O17 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:tcb:wpaper:1115&r=iue |
| By: | Chimeli, Ariaster B. (Ohio University); Soares, Rodrigo R. (Pontifical Catholic University of Rio de Janeiro (PUC-Rio)) |
| Abstract: | Agents operating in illegal markets cannot resort to the justice system to guarantee property rights, to enforce contracts, or to seek protection from competitors' improper behaviors. In these contexts, violence is used to enforce previous agreements and to fight for market share. This relationship plays a major role in the debate on the pernicious effects of the illegality of drug trade. This paper explores a singular episode of transition of a market from legal to illegal to provide a first piece of evidence on the causal effect of illegality on systemic violence. Brazil has historically been the main world producer of big leaf mahogany (a tropical wood). Starting in the 1990s, policies restricting extraction and trade of mahogany, culminating with prohibition, were implemented. First, we present evidence that large scale mahogany trade persisted after prohibition, through misclassification of mahogany exports as "other tropical timber species." Second, we document relative increases in violence after prohibition in areas with: (i) higher share of mahogany exports before prohibition; (ii) higher suspected illegal mahogany activity after prohibition; and (iii) natural occurrence of mahogany. We believe this is one of the first documented experiences of increase in violence following the transition of a market from legal to illegal. |
| Keywords: | illegal markets, violence, homicide, mahogany, Brazil |
| JEL: | K42 O13 O17 Q58 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5923&r=iue |
| By: | Valentina Calderón; Margarita Gáfaro; Ana María Ibáñez |
| Abstract: | Civilian displacement is a common phenomenon in developing countries confronted with internal conflict. While displacement directly affects forced migrants, it also contributes to deteriorating labor conditions of vulnerable groups in receiving communities. For the displaced population, the income losses are substantial, and as they migrate to cities, they usually end up joining the informal labor force. Qualitative evidence reveals that displaced women are better suited to compete in urban labor markets, as their labor experience is more relevant with respect to certain urban low-skilled occupations. Our study uses this exogenous change in female labor force participation to test how it affects female bargaining power within the household. Our results show that female displaced women work longer hours, earn similar wages and contribute in larger proportions to household earnings relative to rural women who remain in rural areas. However, as measured by several indicators, their greater contribution to households’ earnings does not strengthen their bargaining power. Most notably, domestic violence have increased among displaced women. The anger and frustration of displaced women also increases the level of violence directed at children. Because the children of displaced families have been the direct victims of conflict and domestic violence, the intra-generational transmission of violence is highly likely. |
| Date: | 2011–07–05 |
| URL: | http://d.repec.org/n?u=RePEc:col:000089:008912&r=iue |
| By: | Lichand, Guilherme (Harvard Kennedy School); Soares, Rodrigo R. (Pontifical Catholic University of Rio de Janeiro (PUC-Rio)) |
| Abstract: | Entrepreneurship is usually identified as an important determinant of aggregate productivity and long-term growth. The determinants of entrepreneurship, nevertheless, are not entirely understood. A recent literature has linked entrepreneurship to the development of the justice system. This paper contributes to this literature by evaluating the role of access to justice in determining the incidence of entrepreneurship. We explore the creation of Special Civil Tribunals in the Brazilian state of São Paulo during the 1990s. Special Civil Tribunals increased the geographic presence of the justice system, simplified judicial procedures, and increased the speed of adjudication of disputes. Using census data, and difference-in-differences and instrumental variable strategies, we find that implementation of Special Civil Tribunals led to increased entrepreneurship, defined as the probability that individuals are employers or self-employed. Results are particularly strong and robust for the case of self-employment, and do not seem to be related to other changes in infrastructure or public good provision at the local level, or to pre-existing trends in entrepreneurship. |
| Keywords: | access to justice, courts, entrepreneurship, institutions, Brazil |
| JEL: | K1 K41 K42 H41 O12 O17 O54 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5917&r=iue |
| By: | Gebreeyesus, Mulu (UNU-MERIT); Mohnen, Pierre (UNU-MERIT, Maastricht University) |
| Abstract: | This study focuses on innovation in a cluster of informal shoemaking firms in Ethiopia - namely the Mercato footwear cluster. It examines how differently those firms are embedded in networks and how heterogeneous they are in absorptive capacity, and how this heterogeneity affects their innovation performance. Business interactions with buyers, suppliers and other producers are the major channels through which knowledge flows into the cluster. These business networks are mainly built on trust and long-term relationships and tend to be selective. The study reveals that despite homogeneity in social background the firms in the cluster behave and perform differently. Based on econometric analysis we document a positive and strong effect of local network position and absorptive capacity on innovation performance. |
| Keywords: | industrial clusters, networks, innovation performance, informal sector, Africa, Ethiopia |
| JEL: | O17 O31 O33 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:unumer:2011043&r=iue |