Informal work networks

Abstract We present a model of time allocation between formal and informal labour supply, where workers learn of informal job opportunities from their peers. In addition to formal income taxation and enforcement, individuals’ labour supply decisions depend on the number of their peers with informal jobs and the strength of social ties. Workers allocate more time to informal activities when tax enforcement is lax and job information transmission is good. More connected social networks (e.g., wheel, complete) feature lower average income but higher average utility than poorly connected social networks (e.g., star, empty). Average income may be non‐monotonic in tax enforcement.     

Globalisation and Gender Inequality: Evidence from Labour Market in India

This paper examines quantitative and qualitative dimensions of employment issues in India from gender lens. Inequality in quantitative aspects have been analysed gender gap in work participation, composition and structure of employment. The study finds that female work participation in India has declined sharply despite faster economic growth and improvement in female literacy outcomes. The magnitude of decline is sharper in case of illiterate, women from less privileged class and rural backgrounds. Similarly, even after two decades of economic reform, female workers are highly concentrated in low productive, less remunerative and unpaid family labour category of self employment activities. Considering the qualitative dimension of jobs, the paper finds that the condition of female workers are more vulnerable as they are highly concentrated in informal sector and informal jobs with no employment security, no social security, and are being paid relatively lower wages compared to male workers in most of the sub-sector. The paper argues for an urgent policy intervention to ensure access to decent jobs and to provide protection to these vulnerably placed women workers.

     

Tanzanian formal sector workers' participation in informal production

A theoretical model is developed explaining formal sector workers participation in the informal sector. A reduced-form informal sector participation function is derived from a specific utility function, a specific informal sector production function, and a specific informal sector earnings function. The participation function can be estimated consistently, and provides a solution to the problem that informal sector ‘wages’ in developing countries are hard to observe. A sample of Tanzanian formal sector workers is used to estimate the participation function. A majority of Tanzanian formal sector workers participate in informal production. Participation in informal production is inversely related to household income, to living in Dar es Salaam, and to being a mother with small children. Participation is positively related to age, and multiple-job-holding seems to play a very different role in the transition from work to retirement in Tanzania compared to industrialized countries.     

Labour mobility during transitionEvidence from Georgia1

This article deals with labour mobility in Georgia during economic transition. We use quarterly 1998–99 panel data to examine mobility across six labour market statuses (inactivity, unemployment, formal wage employment, informal wage employment, self‐employment and farming). Our findings are consistent with the hypothesis of labour market segmentation. Formal employment is preferred to informal employment. Unemployment is largely a queuing device for individuals with higher education waiting for formal jobs. Some self‐employment is subsistence activities and consistent with a segmented labour market, while other is high risk and potentially high return activities. Age, gender and education are significant determinants of labour mobility. Finally, informal employment serves as a buffer in times of recession – with farming and informal wage employment absorbing labour shed by other statuses during the Russian financial crisis.     

Cross‐Subsidies,and the Elasticity of Informality to Social Expenditures: The Case of Mexico's Seguro Popular

How is the size of the informal sector affected when the distribution of social expenditures across formal and informal workers changes? How is it affected when the tax rate changes along with the generosity of these transfers? In our search model, taxes are levied on formal‐sector workers as a proportion of their wage. Transfers, in contrast, are lump‐sum and are received by both formal and informal workers. This implies that high‐wage formal workers subsidize low‐wage formal workers as well as informal workers. We calibrate the model to Mexico and perform counterfactuals. We find that the size of the informal sector is quite inelastic to changes in taxes and transfers. This is due to the presence of search frictions and to the cross‐subsidy in our model: for low‐wage formal jobs, a tax increase is roughly offset by an increase in benefits, leaving the unemployed approximately indifferent. Our results are consistent with the empirical evidence on the recent introduction of the “Seguro Popular” healthcare program.     

DO MONETARY REWARDS CROWD OUT THE INTRINSIC MOTIVATION OF VOLUNTEERS? SOME EMPIRICAL EVIDENCE FOR ITALIAN VOLUNTEERS

ABSTRACT 1 : The paper studies the determinants of regular volunteering, taking its cue from the previous literature on extrinsic and intrinsic motivations. Its main contribution lies in the analysis of the role of monetary rewards in influencing intrinsic motivation. It uses frameworks that allow empirical hypotheses to be made about the effects of monetary rewards, intrinsic motivation and the combined term on volunteer labour supply. With an Italy‐based survey, the paper shows, controlling for endogenous bias, that monetary payments as well as intrinsic motivation have roles in the real‐life decision to supply volunteer work, but monetary rewards do not crowd out intrinsic motivation.     

International migration and informal social protection in rural Mozambique

This paper uses a unique household survey from two southern regions in Mozambique to examine the extent to which dispatching family labour abroad is a source of informal social protection for households left behind. We do so by studying the relation between migration, remittances and participation in groups that provide informal social services to migrant-sending communities. We distinguish between a range of community associations related to insurance, credit and production provision and we further correct for the endogenous choice of group membership. Results show that migration associated with remittances increase community group participation. In particular, while there is no significant relationship with group membership related to credit or self-help activities, remittance recipients are more likely to join groups that provide insurance. These findings point to the role of migration as a source of social protection for migrant-sending communities at origin.     

Tax Reform,Structural Unemployment and the Environment

The effects of environmental tax reform, i.e., using the proceeds of a higher energy tax rate to lower the labour tax rate, on wage formation, employment and environmental quality are analysed in the context of a small open economy with structural unemployment caused by hiring costs. We find that such a reform may boost employment if it shifts the tax burden away from workers towards those without employment in the formal sector. Environmental tax reform succeeds in shifting the tax burden away from workers in the formal sector if higher energy taxes reduce earnings in the informal sector by reducing labour productivity.     

International factor mobility,informal interest rate and capital market imperfection: A general equilibrium analysis

This paper makes an attempt to provide a theory of determination of interest rate in the informal credit market in a less developed economy in terms of a three-sector static deterministic general equilibrium model. There are two informal sectors which obtain production loans from a monopolistic moneylender and employ labour from the informal labour market. On the other hand, the formal sector employs labour at an institutionally fixed wage rate and takes loans from the competitive formal credit market. We show that an inflow of foreign capital and/or an emigration of labour raises (lowers) the informal (formal) interest rate but lowers the competitive wage rate in the informal labour market when the informal manufacturing sector is more capital-intensive vis-à-vis the informal agricultural sector. International factor mobility, therefore, raises the degrees of distortions in both the factor markets in this case.     

CHILDCARE USE AND PARENTS’ LABOUR SUPPLY IN AUSTRALIA*

Based on data which are representative of the Australian population in 2002, this paper first analyses the demand for and cost of formal and informal childcare for couple and sole‐parent families, shedding light on factors which affect the demand for childcare. The predicted demand of formal childcare and the predicted costs of informal childcare arising from these models are then used to impute total childcare costs at different levels of labour supply. Finally, the predicted total costs are incorporated in the estimation procedure of structural labour supply models for couple and sole parent families. By making several extensions to the methodology adopted in Doiron and Kalb (2005a ), who estimated similar models based on 1996 Australian data and which this paper largely replicates in terms of methodology, it is found that the average elasticities of labour supply with regard to the cost of childcare are quite similar to the earlier estimates. The elasticities remain at the lower end of the range found in the international literature with the exception of the elasticities for sole parents with preschool children and/or on relatively low wages.     

Volunteer Labour Supply: the role of workers' motivations

Abstract In this paper we study the determinants of volunteering. We depart from previous literature that considers only economic incentives and investigate the role that extrinsic and intrinsic motivations play in shaping the supply of voluntary labour. We build on previous theoretical research and derive a framework for interpreting results from our econometric analysis. We consider a sample of Italian workers of which we can observe proxies of motivations and volunteering choices in three different sectors: social services, political activism and union activism. We make due allowance for the endogeneity of motivations and show that both types of motivations have an effect on volunteering. Consistently with theoretical models, we find extrinsic motivations to lower voluntary labour supply, whereas the opposite holds for intrinsic motivations .     

Social Security and Early Retirement: The Relationship Between Workers,Firms and Governments

In this paper we survey a number of theoretical and empirical studies in order to propose explanations to the fall of labour force participation at older age. Starting from the largely studied effect of social security schemes on labour supply, we explore the employers behaviour and the role of governments in the development of early retirement schemes. We show that early retirement is the result of a global agreement between firms and government where workers have incentives to early exit the labour market due to generous non actuarial benefits. Firms have an advantage to separate older workers because they are costly compared to young workers and governments hope that by pushing elderly into early retirement they will solve the massive unemployment problem.     

Analysis of the 1980 Sydney Survey of Work Patterns of Married Women: Further Results*

Using cross-section data from the 1980 Sydney survey of the work patterns of married women, this paper contributes to the very scarce Australian stock of disaggregate econometric studies of the labour market activities of married women. Labour force participation, hours of work and wage functions (reservation wage as well as market wage) are estimated in a second-generation static labour supply framework. Unique features of the study include the availability of direct data on previous market experience, a formulation of the impact of children on the participation decision which permits testing for the presence of economies of scale in child-minding activities, estimation of the reservation wage function, and a data base which permits a clear distinction between earnings and other forms of income.     

THE SHADOW ECONOMY: ILLICIT WORK AND HOUSEHOLD PRODUCTION: A MICROANALYSIS OF WEST GERMANY

This microanalysis of the shadow economy is on informal family income achieving strategies. In particular we analyze both sexes' paid illicit work as well as unpaid work in household production based on the representative West German Sfb3–Secondary Occupation Survey 1984. We estimate the influence of various socioeconomic variables including a legal occupation. As a result, illicit work and household production "Do-It-Yourself" activities are important informal family income achieving strategies. The respective regional state of the formal economy or one's own activities in social networks is of greater importance for informal economic activities than an individual income from formal economic activities.     

Informality in an economy with active labour courts

Job regulations and the justice branch interfere on several aspects of labour contracts. We build a model which explores the role of labour courts on the wage distribution in both formal and informal sectors. We obtain that the presence of active labour courts produces a negative relation between the wage gap and the productivity of the worker, a regularity documented in the empirical literature. Active labour courts also reduce informality of unskilled workers but do not have an impact on informality of skilled workers. Some elements and implications of our model are tested using Brazilian data.     

An evolutionary game theory approach to the dynamics of the labour market: A formal and informal perspective

A stylized fact of the labour market in developing countries is that it is highly segmented in informality. One of the main factors that induce workers and firms into informality is an excessive regulatory system that makes formal economy little attractive. This study aims to analyze the dynamics of workers and firms’ entrance and withdrawal of the formal and informal economy, assessing the impact of taxes by using an evolutionary game theory approach in which economic agents decide for one these markets according to the expected pay-off. Moreover, the optimal relation between regulatory and enforcement action by the government is evaluated.     

Are Minimum Wages to Blame for Informality in the Labour Market?

The paper estimates the impact of the minimum wage on formal and informal employment in a developing country combining the use of aggregate time series data with modern time-series methods. The analysis is carried out for the case of Brazil over the period 1982–2002. The hypothesis under investigation is that minimum wage rises price workers out of the formal labour market and into the informal sector. The modelling strategy involves the estimation of the long-run structure as well as the short-term dynamics of employment equations in which the minimum wage enters as an explanatory variable.JEL codes: J23 J51 C32     

Modernization,Heterogeneity and Employment in Mexico

The principal objective of this paper is to study the effects of Mexico's recent economic reforms on employment and labour productivity. The author argues that the globalization and modernization entailed by the reforms tended to accentuate the structural heterogeneity and the differentials in productivity levels between different sectors.While in formal activities the growth rate of labour productivity accelerated, the contrary occurred in informal activities. Given the relatively moderate rate of increase in output and employment of formal activities, it is very likely that the greater heterogeneity has contributed to the decrease in the average growth rate of labour productivity as observed in Mexico in the period studied.     

The extension of social security coverage in developing countries

We study the dynamic general equilibrium effects of introducing a social pension program to elderly informal sector workers in developing countries who lack formal risk sharing mechanisms against income and longevity risks. To this end, we formulate a stochastic dynamic general equilibrium model that incorporates defining features of developing countries: a large informal sector, private transfers as an informal safety net, and a non-universal social security system. We find that the extension of retirement benefits to informal sector workers results in efficiency losses due to adverse effects on capital accumulation and the allocation of resources across formal and informal sectors. Despite these losses recipients of social pensions experience welfare gains as the positive insurance effects attributed to the extension of a social insurance system dominate. The welfare gains crucially depend on the skill distribution, private intra-family transfers and the specific tax used to finance the expansion.     

A note on the shadow wage in LCDs with migration and formal and informal urban sectors

Given induced rural-to-urban migration, the social cost of (unskilled) labour for urban public sector projects is shown to be lower than the formal-sector, exogenously-determined wage. This result is valid not only when the urban alternative to formal employment is unemployment but also (and more realistically) when the relevant alternatives are formal employment, informal employment and unemployment.