**MONGOLIA'S INFORMAL** SECTOR -

**Notes**

**59**

these two informal sector activities has been estimated to be sizable relative to official GDP, even though they represent only a minute fiaction of Ulaanbaatar's informal activity. Ulaanbaatar's kiosks are estimated to generate value added equivalent to about **3/4%** of GDP for the entire country, or roughly 2.3% of the Ulaanbaatar economy. Ulaanbaatar's taxicabs, most of whom are part-time drivers and moonlighters, are estimated to generate value added equivalent to about 3% of GDP for the entire country, or roughly 9% of the Ulaanbaatar economy. See Appendix A for details about these and other informal occupations, and Appendix B for an explanation of the methodology used to estimate value added. Many case studies of micro entrepreneurship, including kiosks, can also be found in Centre for Social Development, 1996.

47.For a discussion of how empirical studies of the informal sector reach wildly different estimates of the size of the informal sector, depending on assumptions, see Poapongsakorn (1991) for Thailand; Alonzo (1991) for the Philippines; and Porter and Bayer (1984) for a discussion of divergent estimates of the size of the "underground" economy in the United States, even within a single family of analyses (those using monetary aggregates).

48.The project, "Research on the Consequences of Large-Scale Privatization in Mongolia," entailed a survey of 250 enterprises which had passed through Mongolia's large privatization program by mid-1996. The estimates quoted in the text are true for both Ulaanbaatar and for Mongolia as a whole. See Anderson, Korsun, Murrell, forthcoming.

49.As discussed earlier, those laid off from formal sector jobs may be entitled to unemployment benefits, but the benefits expire rapidly.

50.The reference to "no skills" in this paragraph should not be confused with the reference to difficulty finding a "job to match their skills" mentioned in the previous paragraph. The latter, in the Mongolian language, implies in possession of specific, marketable, skills for which the respondent could not find a job. The former means the lack of any marketable skills.

51. The official poverty line at the time of the survey was 8,000 togrogs per household member. However, the official poverty line tends to be changed very infrequently, such that the real poverty line declines over time followed by a large increase when the official poverty line is changed. If unadjusted, this would result in an apparent decline in the poverty rate over time, followed by a sudden jump in poverty. But the phenomena would only be an artifact of inflation. So, for the analysis of poverty in this section, a poverty line of 9,600 was used for October 1996, and 9,800 was used for November, 1996. These levels were determined by simple interpolation between two months during which the official poverty line was adjusted: February 1996: 8,000; February 1997: 10,400.

The estimates presented in the Box refer to November, 1996. In October, 1996, 38% were below the official poverty line (adjusted as above), but 54% would have been if they didn't have informal income.

The estimation of the number of children raised from poverty is computed by multiplying the actual number of children in the marginal households (those above the official poverty line only because of informal income) by the inverse of the proportion of Ulaanbaatar households sampled.

Using a Living Standard Measurement Survey (LSMS), the World Bank found an incidence of poverty in Ulaanbaatar in June 1995 of 35 percent. See World Bank 1996 for a detailed discussion of poverty in Mongolia.

52.From SSO statistics, compiled from official police registrations.

53.The lack of a market for urban land does not mean that urban land is completely unavailable for development. But the procedures for obtaining permission to build on land are relatively more nebulous and subject to the whims of local authorities than would be the case with private ownership.

The reference to utilities reflects the difficulties of adding new demands to an already stretched energy sector. The system of centralized heating in Ulaanbaatar means that any construction of a new building requires new heating connections; any connection of a new building, therefore, requires permission to supply heat to the new