Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/edb/cedidp/12-02.html
   My bibliography  Save this paper

Self-Employment, Wage Employment and Informality in a Developing Economy

Author

Listed:
  • John Bennett
  • Matthew Rablen
Abstract
We construct a simple model incorporating various urban labour market phenomena obtaining in developing economies. Our initial formulation assumes an integrated labour market and allows for entrepreneurship, self-employment and wage employment. We then introduce labour market segmentation. In equilibrium voluntary and involuntary self-employment, formal and informal wage employment, and formal and informal and informal entrepreneurship may all coexist. We illustrate the model by an example calibrated on Latin American data, examining individual labour market transitions and implications of education/training and labour market policies. To diminish informality, cutting the costs of formality is more effective than raising those of informality.

Suggested Citation

  • John Bennett & Matthew Rablen, 2012. "Self-Employment, Wage Employment and Informality in a Developing Economy," CEDI Discussion Paper Series 12-02, Centre for Economic Development and Institutions(CEDI), Brunel University.
    • Handle: RePEc:edb:cedidp:12-02
    as

    Download full text from publisher

    File URL: http://www.brunel.ac.uk/__data/assets/pdf_file/0004/342769/CEDI_12-02.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Fortin, Bernard & Marceau, Nicolas & Savard, Luc, 1997. "Taxation, wage controls and the informal sector," Journal of Public Economics, Elsevier, vol. 66(2), pages 293-312, November.
    2. Nicholas Bloom & Benn Eifert & Aprajit Mahajan & David McKenzie & John Roberts, 2013. "Does Management Matter? Evidence from India," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(1), pages 1-51.
    3. Eliane El Badaoui & Eric Strobl & Frank Walsh, 2008. "Is There an Informal Employment Wage Penalty? Evidence from South Africa," Economic Development and Cultural Change, University of Chicago Press, vol. 56(3), pages 683-710, April.
    4. Bosch, Mariano & Maloney, William F., 2010. "Comparative analysis of labor market dynamics using Markov processes: An application to informality," Labour Economics, Elsevier, vol. 17(4), pages 621-631, August.
    5. James Albrecht & Lucas Navarro & Susan Vroman, 2009. "The Effects of Labour Market Policies in an Economy with an Informal Sector," Economic Journal, Royal Economic Society, vol. 119(539), pages 1105-1129, July.
    6. de Mel, Suresh & McKenzie, David & Woodruff, Christopher, 2008. "Who are the microenterprise owners ? Evidence from Sri Lanka on Tokman v. de Soto," Policy Research Working Paper Series 4635, The World Bank.
    7. Banerji, Arup & Jain, Sanjay, 2007. "Quality dualism," Journal of Development Economics, Elsevier, vol. 84(1), pages 234-250, September.
    8. Aureo de Paula & Jose A. Scheinkman, 2006. "The Informal Sector," Levine's Bibliography 122247000000001030, UCLA Department of Economics.
    9. Fiess, Norbert M. & Fugazza, Marco & Maloney, William F., 2010. "Informal self-employment and macroeconomic fluctuations," Journal of Development Economics, Elsevier, vol. 91(2), pages 211-226, March.
    10. E. Paul Durrenberger, 2005. "Labour," Chapters, in: James G. Carrier (ed.), A Handbook of Economic Anthropology, chapter 8, Edward Elgar Publishing.
    11. Almeida, Rita & Carneiro, Pedro, 2009. "Enforcement of labor regulation and firm size," Journal of Comparative Economics, Elsevier, vol. 37(1), pages 28-46, March.
    12. Loayza, Norman V. & Rigolini, Jamele, 2006. "Informality trends and cycles," Policy Research Working Paper Series 4078, The World Bank.
    13. Ahsan, Ahmad & Pages, Carmen, 2007. "Are all labor regulations equal ? Assessing the effects of job security, labor dispute, and contract labor laws in India," Policy Research Working Paper Series 4259, The World Bank.
    14. Aureo de Paula & Jose A. Scheinkman, 2007. "The Informal Sector, Third Version," PIER Working Paper Archive 08-018, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 21 May 2008.
    15. Ana Maria Oviedo & Mark R. Thomas & Kamer Karakurum-Ozdemir, 2009. "Economic Informality : Causes, Costs, and Policies - A Literature Survey," World Bank Publications - Books, The World Bank Group, number 5917.
    16. Antunes, Antonio R. & Cavalcanti, Tiago V. de V., 2007. "Start up costs, limited enforcement, and the hidden economy," European Economic Review, Elsevier, vol. 51(1), pages 203-224, January.
    17. Sebastian Galiani & Federico Weinschelbaum, 2012. "Modeling Informality Formally: Households And Firms," Economic Inquiry, Western Economic Association International, vol. 50(3), pages 821-838, July.
    18. Rauch, James E., 1991. "Modelling the informal sector formally," Journal of Development Economics, Elsevier, vol. 35(1), pages 33-47, January.
    19. Gollin, Douglas, 2008. "Nobody's business but my own: Self-employment and small enterprise in economic development," Journal of Monetary Economics, Elsevier, vol. 55(2), pages 219-233, March.
    20. Amaral, Pedro S. & Quintin, Erwan, 2006. "A competitive model of the informal sector," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1541-1553, October.
    21. Guillermo E. Perry & William F. Maloney & Omar S. Arias & Pablo Fajnzylber & Andrew D. Mason & Jaime Saavedra-Chanduvi, 2007. "Informality : Exit and Exclusion," World Bank Publications - Books, The World Bank Group, number 6730.
    22. Cunningham, Wendy & Salvagno, Javier Bustos, 2011. "Youth employment transitions in Latin America," Policy Research Working Paper Series 5521, The World Bank.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Eunice Maria M. N. Dos Santos & João J. Ferreira, 2017. "Analyzing Informal Entrepreneurship: A Bibliometric Survey," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 22(04), pages 1-20, December.
    2. Abu Shonchoy & PN Junankar, 2014. "The informal labour market in India: transitory or permanent employment for migrants?," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-27, December.
    3. John Bennett & Matthew Gould & Matthew Rablen, 2012. "Risk attitudes and informal employment in a developing economy," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 1(1), pages 1-17, December.
    4. Xue, Jinjun & Gao, Wenshu & Guo, Lin, 2014. "Informal employment and its effect on the income distribution in urban China," China Economic Review, Elsevier, vol. 31(C), pages 84-93.
    5. Iain W. Long & Vito Polito, 2017. "Job Search, Unemployment Protection and Informal Work in Advanced Economies," CESifo Working Paper Series 6763, CESifo.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. John Bennett, 2010. "Informal firms in developing countries: entrepreneurial stepping stone or consolation prize?," Small Business Economics, Springer, vol. 34(1), pages 53-63, January.
    2. Erik Jonasson, 2011. "Informal Employment and the Role of Regional Governance," Review of Development Economics, Wiley Blackwell, vol. 15(3), pages 429-441, August.
    3. Heid, Benedikt, 2014. "Preferential Trade Agreements, Unemployment, and the Informal Sector," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100376, Verein für Socialpolitik / German Economic Association.
    4. Daniel Haanwinckel & Rodrigo R Soares, 2021. "Workforce Composition, Productivity, and Labour Regulations in a Compensating Differentials Theory of Informality [Search with Multi-worker Firms]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(6), pages 2970-3010.
    5. Bennett, John, 2008. "Formality, Informality, and Social Welfare," IZA Discussion Papers 3550, Institute of Labor Economics (IZA).
    6. Gabriel Ulyssea, 2018. "Firms, Informality, and Development: Theory and Evidence from Brazil," American Economic Review, American Economic Association, vol. 108(8), pages 2015-2047, August.
    7. Leal-Ordoñez Julio C., 2014. "The informal sector in contemporary models of the aggregate economy," Working Papers 2014-24, Banco de México.
    8. Olivier Bargain & Eliane Badaoui & Prudence Kwenda & Eric Strobl & Frank Walsh, 2012. "The formal sector wage premium and firm size for self-employed workers," Working Papers 201207, School of Economics, University College Dublin.
    9. John Bennett, 2011. "Informal Production and Labour Market Segmentation," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 167(4), pages 686-707, December.
    10. Bosch, Mariano & Maloney, William F., 2010. "Comparative analysis of labor market dynamics using Markov processes: An application to informality," Labour Economics, Elsevier, vol. 17(4), pages 621-631, August.
    11. Zoë Kuehn, 2014. "Tax Rates, Governance, And The Informal Economy In High-Income Countries," Economic Inquiry, Western Economic Association International, vol. 52(1), pages 405-430, January.
    12. Rita Almeida & Pedro Carneiro, 2012. "Enforcement of Labor Regulation and Informality," American Economic Journal: Applied Economics, American Economic Association, vol. 4(3), pages 64-89, July.
    13. Julio Cesar Leal Ordonez, 2014. "Tax collection, the informal sector, and productivity," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(2), pages 262-286, April.
    14. Arturo Antón & Alejandro Rasteletti, 2022. "Taxing Labor Income in an Economy with High Employment Informality," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 33-68, June.
    15. Almeida, Rita K. & Carneiro, Pedro, 2007. "Inequality and Employment in a Dual Economy: Enforcement of Labor Regulation in Brazil," IZA Discussion Papers 3094, Institute of Labor Economics (IZA).
    16. Almeida, Rita & Carneiro, Pedro, 2008. "Mandated benefits, employment, and inequality in a dual economy," Social Protection Discussion Papers and Notes 45051, The World Bank.
    17. Lopez-Martin, Bernabe, 2019. "Informal Sector Misallocation," Macroeconomic Dynamics, Cambridge University Press, vol. 23(8), pages 3065-3098, December.
    18. Bosch, Mariano & Esteban-Pretel, Julen, 2012. "Job creation and job destruction in the presence of informal markets," Journal of Development Economics, Elsevier, vol. 98(2), pages 270-286.
    19. Bosch, Mariano & Esteban-Pretel, Julen, 2015. "The labor market effects of introducing unemployment benefits in an economy with high informality," European Economic Review, Elsevier, vol. 75(C), pages 1-17.
    20. Samaniego de la Parra Brenda & Fernández Bujanda León, 2020. "Increasing the Cost of Informal Workers: Evidence from Mexico," Working Papers 2020-19, Banco de México.

    More about this item

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:edb:cedidp:12-02. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarmistha Pal (email available below). General contact details of provider: https://edirc.repec.org/data/cedibuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.