returns to micro entrepreneurship in an emerging economy a quantile study of entrepreneurial indonesian households welfare presenting low individual returns but providing households with livelihoods and means to cope with economic vulnerability micro entrepreneurship s evaluation should include both context and heterogeneity using a four wave panel of 9 157 indonesian households this study proposes a quantile estimation of micro entrepreneurship s effects on four household level complementary measures of welfare income consumption household and total assets it evidences substantial positive but decreasing effects on the four measures with the highest relative returns for the poorest for this category micro entrepreneurship primarily provides returns in the form of income translating into higher relative consumption but more importantly into a greater relative assets accumulation

taxing the unobservable the impact of the shadow economy on inflation and taxation summary because the shadow economy cannot be taxed it erodes the tax base and reduces tax revenues forcing governments to resort to other ways to finance their expenditures accordingly a larger shadow economy should give governments an incentive to shift revenue sources from taxes to inflation in line with the public finance motive of inflation in this paper we recall that point in a simple canonical model then empirically test it in a sample of up to 153 developed and developing countries over the 1999 2007 period in line with the model s prediction we indeed observe a positive relation between inflation and the size of the shadow economy and a negative relation between the tax burden and the size of the shadow economy we find that both relations are conditional on central bank independence and on the exchange rate regime implying that it is the strongest in institutional set ups that constrain monetary policy the least both relations are present in the sub sample of developed countries as well as the sub sample of developing countries both relations survive several robustness checks using various sets of control variables including the stock of debt controlling for endogeneity using alternative estimates of the shadow economy and estimating the two relations as a system of equations

the response of the informal sector to trade liberalization this paper studies the relationship between trade liberalization and informality it is often claimed that increased foreign competition in developing countries leads to an expansion of the informal sector defined as the sector that does not comply with labor market legislation using data from two countries that experienced large trade barrier reductions in the 1980 s and 1990 s brazil and colombia we examine the response of the informal sector to liberalization in brazil we find no evidence of a relationship between trade policy and informality in colombia we do find evidence of such a relationship but only for the period preceding a major labor market reform that increased the flexibility of the colombian labor market these results point to the significance of labor market institutions in assessing the effects of trade policy on the labor market

tax incentives and fertility in canada quantum vs tempo effects using inter jurisdictional differences in the implementation of the family allowance program in canada in the mid 1970s this paper first shows that quebec families with two or more children prior to being exposed to the program responded quite strongly to the added incentives in the short run relative to women in other canadian provinces tracking down the cohorts across censuses we find that the same group of quebec families subsequently showed a decrease in fertility relative to the rest of canada leaving ultimate family size unaffected these results are consistent with the program having generated only a timing effect utilisant les differences entre juridictions dans la mise en uvre du programme d allocations familiales au canada au milieu des annees 70 ce memoire montre d abord que les familles quebecoises qui avaient deux enfants ou plus avant d etre exposees au programme ont repondu tres fortement aux incitations additionnelles a court terme en comparaison avec ce qui s est passe dans les autres provinces canadiennes en suivant les cohortes a travers les recensements on montre que ce meme groupe de familles du quebec a par la suite subi un declin de fecondite par rapport au reste du canada ce qui a eu pour effet de laisser la taille de la famille ultimement non affectee d une maniere relative ces resultats sont coherents avec la conclusion que le programme a seulement eu un effet sur le profil temporel de la fecondite

the informal sector in developed and less developed countries a literature survey the main goal of this study is two fold 1 to provide ageneral overview of the contributions to the literature on theinformal sector with a special focus on the public choiceapproach and 2 to compare these contributions across twoinstitutionally different types of countries developed andless developed developing and transition countries thepaper focuses on the criteria used to define the informalsector the relationship between the formal and informaleconomy tax evasion and public choice analysis it isstressed throughout this paper that the distinction betweenthe two types of countries is of key importance

gender entrepreneurship and the formal informal dilemma evidence from indonesia summary this study analyzes the preferences of entrepreneurs about formality and focuses on the role of gender relying on original data collected in indonesia we unpack the differences between various types of female entrepreneurs currently in the informal sector according to their preferences about formalization contrary to the existing literature we find that female entrepreneurs possess highly nuanced preferences about formalization that are conditional on many factors the preference for formalization is strongest among female entrepreneurs who are older married rural based and have recently started their firms our work contributes to research that seeks to better understand entrepreneurial preferences and the role that gender plays

formal measures of the informal sector wage gap in mexico el salvador and peru using comparable micro level data from three countries we ask what type of person works in the informal sector and whether informal workers earn lower wages than observationally equivalent workers in the formal sector the characteristics of informal workers are similar across countries surprisingly when we control for these personal characteristics we find a significant wage premium associated with formal employment in el salvador and peru but a premium associated with work in the informal sector in mexico a model of endogenous selection offers little help in explaining the differences in wage patterns the research casts doubt on the received wisdom that the informal sector always and everywhere is a poorly paid but easily entered refuge for those who have no other employment opportunities this abstract was borrowed from another version of this item

a reassessment of kenya s rural and urban informal sector abstract the nature and role of the so called informal sector are re examined on the basis of a detailed country study using different data sources relating to kenya which have recently been published or become available specific kenyan phenomena are identified and commented upon particularly the importance of divided households obtaining their living in both agriculture and the urban informal sector and the tendency of informal sector manufacturing enterprises to form agglomerations the informal sector is seen as a heterogeneous set of activities urban or rural which have the common features of catering not uniquely to the mass of low income consumers existing competitively due to the low supply price of labor and being capable of retaining an important role in economies with widely varying levels of development so long as this supply price remains low

the urban informal sector in uruguay its internal structure characteristics and effects abstract the literature on third world urbanization has focused increasingly on the informal sector as a mechanism to explain first the survival strategies of the poor excluded from regular employment and second the strategies of formal firms to bypass regulatory constraints and reduce costs this paper pursues these lines of research in a special context namely that of uruguay a small country which followed a protective labor policy for many years but reversed it during the 1970s and early 1980s data come from a sample of 700 households in montevideo which are representative of the low income neighborhoods that comprise approximately two thirds of the city s population interviews were held in 1983 1984 the analysis focuses on the following issues 1 the proportion of individuals and households who participate in the informal economy 2 the types of informality that exist in both principal and secondary occupations 3 the effects of informal employment on income 4 differences in age sex and education between different types of workers 5 changes in informal employment over time implications of findings for general definitions and hypotheses about the informal sector are examined the relationship of results to the neoliberal experiments attempted in uruguay between 1973 and 1984 is discussed

segmented or competitive labour markets a normal roy model with four sectors is developed it allows to derive tests of several assumptions on the working of the labor market strongly or weakly competitive or segmented it shows that more important a feature of labor markets than segmentation is the presence of comparative advantages for individuals between the various economic sectors the model is applied to data on women s labor force participation in the main towns of colombia in 1980 it uses multivariate probit and tobit techniques copyright 1991 by the econometric society

can africa compete with china in manufacturing the role of relative unit labor costs in this paper examine sub saharan africa s ssa bilateral trade and cost competitiveness with china we review patterns of bilateral trade between ssa and china showing an extraordinary imbalance in the structure of trade in that china overwhelmingly exports manufactured products to ssa and almost exclusively imports primary products in return our principal means of assessing the competitiveness of ssa s manufacturing sector vis a vis china are measures of relative unit labor costs rulc we find that african rulc levels have generally been very high relative to china but declined over the 2000s as china s wages have risen faster than chinese productivity while the reverse is true for the ssa countries in our sample nevertheless rulc vis a vis china remained elevated for many ssa countries as of 2010 generally high rulc along with weaknesses in the business climate suggest that most ssa countries are unlikely to be competitive in labor intensive manufacturing any time soon

household labor supply in urban areas of bolivia we analyze labor supply behavior and the choice between formal and informal sector work of the two spouses in families in urban areas of a developing country using cross section data from bolivia drawn in 1989 the model generalizes the neoclassical family labor supply model nonmonetary returns of formal sector employment capture the fact that the choice between sectors is not exclusively based on wage differentials wage equations nonmonetary returns equations and labor supply equations are estimated jointly by smooth simulated maximum likelihood we find substantial cross wage elasticities of working hours of both partners and large substitution elasticities between the two sectors

does access to foreign markets shape internal migration evidence from brazil this paper investigates how internal migration is affected by brazil s increased integration into the world economy it analyzes the impact of regional differences in access to foreign demand on sector specific bilateral migration rates between the brazilian states for the years 1995 to 2003 using international trade data a foreign market access measure is computed at the sectoral level which is exogenous to domestic migration a higher foreign market access is associated with a higher local labor demand and attracts workers via two potential channels higher wages and new job opportunities results show that both channels play a significant role in internal migration further we find a heterogeneous impact across industries according to their comparative advantage on the world market however the observed impact is driven by the strong reaction of low educated workers to changes in market access this finding is consistent with the fact that brazil is exporting mainly goods that are intensive in unskilled labor

monetary policy and short term interest rates an efficient markets rational expectations approach this paper is an application of efficient markets rational expectations theory to analyze empirically the relationship of money supply growth and short term interest rates a hotly debated issue in the literature this approach has the advantage over earlier research on this subject in that it imposes a theoretical structure that allows easier interpretation of the empirical results as well as more powerful statistical tests the empirical results uniformly do not support the proposition that increases in money growth are correlated with declines in short rates the relationship between money supply growth and nominal interest rates is a hotly debated issue in the literature one view associated with keynesian structural macromodels has an increase in money growth leading at least in the short and medium runs to a decline in interest rates 2 an alternative view associated with milton friedman 6 7 indicates that interest rates might rise in response to higher money growth because there is a rise in inflationary expectations and hence a rise in interest rates through a fisher 5 effect

government effectiveness and regional variation in informal employment abstract this article analyses the role of government effectiveness in the determination of informal employment a theoretical model is developed in which local governance and worker skill level are assumed to influence the decision of the worker whether to seek employment in the formal or informal sectors the model is assessed empirically using data from brazil where almost half of the urban labour force is employed informally the empirical analysis supports the predictions of the model and suggests that the probability of a worker being employed informally is lower in regions with better governance and higher average education

evidence from lagos on discrimination across ethnic and class identities in informal trade abstract this paper investigates the determinants of price discrimination in the rice market in one neighborhood of lagos nigeria there has been little empirical study of how ethnicity and class shape economic outcomes in informal market interactions we conduct an audit experiment one of the first audit experiments in africa seeking to address this gap we experimentally manipulate class with confederates presenting as different classes this may be the first audit study to take this approach this is also one of the first in person audits to have multiple transactions for each buyer and seller thus allowing for the use of buyer and seller fixed effects we find little evidence that all else equal sharing an ethnicity on its own influences market treatment class however does have substantial effects at least for non coethnics high class non coethnics receive higher prices per unit than low class non coethnics our findings suggest that the boundaries of group identity appear to be at least partially defined by class in the informal economy

labor market choices earnings and informal networks in khartoum sudan a micro economic labor force model was used to explain the relationship between five labor market segments and earnings in khartoum sudan the assumption was that individuals maximized their earnings by comparing the rewards of working in alternative and mutually exclusive segments of the labor market the polychotomous choice model allowing for unobserved factors used the hay dubin and mcfadden extension of heckmans technique for correcting for selection bias data were obtained from a private survey conducted by the authors during 1988 89 the sample included 1756 small scale enterprises and 1505 self employed workers and 2572 employees in the informal sector and 8037 workers in 170 formal sectors firms 12114 workers the five segments included public sector employment in the formal sector private sector employment in the formal sector private large self employed in the informal sector informal sector employees working in permanent structures private small and informal sector employees working for unlicensed firms without a permanent structure unprotected workers earnings were lowest in the unprotected segment and highest among self employed businessmen the model supported the view that private and large employers hired the best workers findings supported kannapans hypothesis that informal networks based on ethnicity were important in determining access to urban labor markets a high correlation was found between province of birth of the employer and employees the public sector earnings model had the highest degree of explanatory power of earnings differences wages in the private small and unprotected segments were also determined by education the findings suggested that studies of the rate of return to education should account for how social networks affect the probability of workers obtaining employment in a particular segment and should account for fixed wage rates in particular segments

formal but less equal gender wage gaps in formal and informal jobs in urban brazil in developing countries a large share of employees work informally and are not covered by employment protection legislation i study here how gender wage inequality differs across formal and informal jobs in brazil the raw gender wage gap is higher in informal jobs 13 compared to formal jobs 5 but i show that this difference is an artefact of different male and female selection processes first women have better observable characteristics than men and the female advantage is stronger among formal employees second men and women entering formal and informal jobs have different unobservable characteristics controlling for endogenous selection into formal vs informal jobs i find that the gender gap in wage offers is high and increases with education in formal jobs in informal jobs however estimated wage offers are the same for men and women i discuss the potential implications of these findings regarding the effect of labour market regulation on gender wage gaps

on defining and measuring the informal sector evidence from brazil summary recent debate on the reasons for the informal sector has led to renewed focus on how to operationalize the measurement of informal employment this paper investigates congruence between three empirical measures of the rate of informality using brazilian household survey data for the period 1992 2004 sixty three percent of the economically active are informal according to at least one definition but only 40 are informal according to all three regression analysis is used to shed further light on differences in these measures appropriate measurement is therefore of high significance to policy analysis and design of appropriate strategies to reduce informality

labor turnover and labor legislation in brazil one of the main characteristics of the brazilian labor market is its impressively high job and worker turnover rates although labor legislation in brazil is very restrictive dismissal costs are not high when compared with other latin american countries moreover many authors argue that the design of some job security programs creates perverse incentives that generate labor turnover the objective of this paper is twofold first we describe brazilian labor legislation with emphasis on job security provisions and their incentives on workers reallocation then after reviewing the most recent evidence on labor turnover in brazil we investigate the effects of changes in job termination costs implemented in the 1988 constitution and in a labor law of september 2001 on employment duration both legislation changes increased firing costs and should have therefore reduced turnover for formal workers affected by them a simple differences in differences methodology is applied to monthly individual data from pesquisa mensal de emprego pme ibge which has information on previous employment spells for those currently unemployed the results establish that both changes reduced turnover for formal workers affected by the legislation a significant increase in average employment duration of affected workers relative to not affected workers was observed after both legislation changes we also provided evidence that the 1988 constitutional change reduced the probability of fake layoffs although there are still a high number of such agreements being made between workers and their employers