Does Informality Imply Segmentation in Urban Labor Markets? Evidence from Sectoral Transitions in Mexico

This article offers an alternative to the traditional dualisticview of the relationship between formal and informal labor markets.For many workers inefficiencies in formal sector protectionsand low levels of labor productivity may make informal sectoremployment a desirable alternative to formal sector employment.The analysis offers the first study of worker transitions betweensectors using detailed panel data from Mexico and finds littleevidence in favor of the dualistic view. Traditional earningsdifferentials cannot prove or disprove segmentation in the developing-countrycontext. The patterns of worker mobility do not suggest a rigidlabor market or one segmented along the formal/informal division.     

The Algerian Retrenchment System: A Financial and Economic Evaluation

The government of Algeria has adopted a new retrenchment systemto facilitate labor shedding in a public sector characterizedby redundant workers and in an environment of already high unemployment.This article assesses the financial viability of the retrenchmentsystem and the inherent welfare costs and benefits associatedwith layoffs. A Financial flows model tracks the UnemploymentInsurance Fund's revenue and expenditure flows during the projectedfive-year adjustment period. It finds that even in the presenceof massive retrenchment (21 percent of formal sector employment),the fund accumulates reserves equivalent to nearly 2 percentof gross domestic product. Because many displaced workers willend up in the informal sector, the resulting productivity gainsor losses depend crucially on the initial level of productivityin the public sector. At the same time, retrenchment entailsunambiguous benefits by reducing subsidies to state-owned enterprises,thereby generating efficiency gains. Considering these two effectstogether, the welfare model estimates that retrenching 13 percentof the formal sector will generate annual net welfare gainsranging from costs of $358 million to gains of $774 million.     

Choosing a System of Unemployment Income Support: Guidelines for Developing and Transition Countries

Mounting evidence suggests that excessive job protection reducesemployment and labor market flows, hinders technological innovations,pushes workers into the informal sector, and hurts vulnerablegroups by depriving them of job opportunities. Flexible labormarkets stimulate job creation, investment, and growth, butthey create job insecurity and displace some workers. How canthe costs of such insecurity and displacements be minimizedwhile ensuring that the labor market remains flexible? Eachof the main unemployment income support systems (unemploymentinsurance, unemployment assistance, unemployment insurance savingsaccounts, severance pay, and public works) has strengths andweaknesses. Country-specific conditions—chief among themlabor market and other institutions, the capacity to administereach type of system, and the size of the informal sector—determinewhich system is best suited to developing and transition countries.      

Asymmetries in the Union Wage Premium in Ghana

There is little evidence on the size of the union wage premiumin developing economies. The article uses a matched employer-employeedata set for Ghana and adopts a quantile regression approachthat allows the effects of unionization to vary across the conditionalwage distribution. It is shown that if there are intrafirm differencesin unionization, there does appear to be a premium among poorerpaid workers in the formal sector. Although this cannot be givena causal interpretation, it suggests important issues abouthow unions may affect one part of the labor market.     

The Impact of Firing Costs on Turnover and Unemployment: Evidence from the Colombian Labour Market Reform

Reductions in firing costs are often advocated as a way of increasing the dynamism of labour markets in both developed and less developed countries. Evidence from Europe and the U.S. on the impact of firing costs has, however, been mixed. Moreover, legislative changes both in Europe and the U.S. have been limited. This paper, instead, examines the impact of the Colombian Labour Market Reform of 1990, which substantially reduced dismissal costs. I estimate the incidence of a reduction in firing costs on worker turnover by exploiting the temporal change in the Colombian labour legislation as well as the variability in coverage between formal and informal sector workers. Using a grouping estimator to control for common aggregate shocks and selection, I find that the exit hazard rates into and out of unemployment increased after the reform by over 1\% for formal workers (covered by the legislation) relative to informal workers (uncovered). The increase of the hazards implies a net decrease in unemployment of a third of a percentage point, which accounts for about one quarter of the fall in unemployment during the period of study.     

Editorial

This article analyses the ways that Spanish public water companies communicate sustainability information to their stakeholders and explores whether distinctive and more progressive accountability is possible in the public sector in comparison with private sector organizations. Two distinct activities are identified in sustainable accountability: public organizations are engaged in informal as well as formal reporting activity, and their reporting seems to be coupled with real organizational strategies and operational activities.     

社会信任与企业劳动投资效率

本文从非正式制度的视角,研究了社会信任与企业劳动投资效率的关系。研究发现,社会信任有助于提高企业劳动投资效率。进一步研究表明,社会信任与企业劳动投资效率的相关关系在融资约束越强以及代理冲突更严重的企业中更显著。同时,随着信息不对称程度的加大,社会信任对企业劳动投资效率的提升作用更显著。此外,社会信任对企业劳动投资效率的改善主要表现为降低劳动投资不足,且对雇佣不足与解雇过度两个方面都存在抑制作用。本文丰富了社会信任的经济后果和企业投资效率影响因素的研究,对于揭示社会信任在企业劳动投资中的作用以及提高劳动投资效率具有一定启示意义。     

Interactions between Institutional and Informal Credit Agencies in Rural India

In an attempt to expand rural credit and displace the villagemoneylender, India created a system of rural cooperatives inthe 1950s and expanded branch banking into rural areas in the1970s. This article examines how these measures affected therural market. It begins with the question of how large the expansionof institutional credit has been and the extent to which ithas dislodged the village and nonresident moneylenders. A detailedcomparison of three major surveys of the Indian rural creditmarket suggests that in various guises, the moneylender is stilla major source of loans. The article also examines the (weak)evidence on intermediation between the formal and informal sectors.A formal model of the interaction between the informal moneylenderand institutional lender is constructed under a variety of assumptionsabout the exclusivity of loan contracts and the competitivestructure of the informal sector. The conclusions are drawntogether in the form of five proposals for public policy.     

The Thai Rural Credit System: Public Subsidies, Private Information, and Segmented Markets

Thailand has sought to increase farmers' access to credit bygovernment intervention. In 1966 it created a government agriculturalbank to lend solely to farm households, and beginning in thelate 1970s it required commercial banks to lend heavily in therural sector, either directly or by making deposits in the agriculturalbank. The result was an enormous expansion of credit in therural sector. But because formal lenders were either unableor unwilling to solve the information problems involved in thebroad range of rural credit transactions, the informal creditsector (which charged interest rates many times higher thanthe formal sector) continued to thrive. Using household surveysand surveys of moneylenders, this article provides a detailedanalysis of the ways in which lenders in the informal sectorhave solved the information problems of providing credit. Theauthors argue that the informal sector is competitive, and thathigh interest rates reflect high information costs, not thescarcity of funds.     

Financial structure,informality and development

The impact of capital market imperfections and costs of creating and operating formal sector firms on total factor productivity is studied. We propose a firm dynamics model with endogenous formal and informal sectors where firms face a technology adoption opportunity. The model predicts that countries with a low degree of debt enforcement and high costs of formality are characterized by low allocative efficiency and large output shares produced by low productivity, informal sector firms. For frictions parametrized using the Doing Business database, the model generates a drop in total factor productivity of up to 25% relative to the US.     

Illegal immigration and the shadow economy

We build a model in which both illegal immigration and the size of the informal sector are endogenously determined. In this framework, we show that indirect policy measures such as tax reduction and detection of informal activities can be used as substitutes for border enforcement, in order to counteract illegal immigration. We also find that a welfare-maximizing government will set the tax rate to a lower value, if it includes illegal immigration in its objective function, instead of focusing on the well-being of native workers only.     

The SEWA way: Shaping another future for informal labour

Globalization has accelerated the growth of the informal sector worldwide. It now comprises majority workers in many countries, especially the developing world. The trade union movement should ideally have come forward to organize informal labour, both to legitimise itself and to help the exploited masses uplift themselves. Unfortunately, examples of this are few. Non-governmental organizations have stepped in to a limited extent to help organize informal labour ‘bottoms-up’ and from `above’—urging the corporate world to cleanse its supply chains and consumers to buy `fair trade’ products. In some instances, new or alternative unions have emerged. The Self-Employment Women's Association (SEWA), a trade union of nearly 700,000 poor women in the informal sector in India, can be seen as a pioneer of this trend though it first emerged as far back as in 1972 in the textile town of Ahmedabad, Gujarat. An analysis of SEWA's way of functioning, its holistic approach encompassing socio-economic and political rights and its widespread impact offers lessons for organising informal labour to give these workers a brighter future. This paper elaborates these lessons based on the SEWA experience.     

Financial Market Fragmentation and Reforms in Ghana, Malawi, Nigeria, and Tanzania

This article reports the findings from surveys of formal andinformal institutions and their clients in Ghana, Malawi, Nigeria,and Tanzania. It investigates the hypothesis that reformingfinancially repressive policies would not be sufficient to overcomefragmentation of financial markets because of structural andinstitutional barriers to interactions across different marketsegments. The four countries have substantially fragmented financialmarkets, with weak linkages between formal and informal segmentsand interest rate differentials that cannot be adequately explainedby differences in costs and risks. Nevertheless, the relativelylow transaction costs and loan losses of informal institutionsindicate that they provide a reasonably efficient solution toinformation, transaction cost, and enforcement problems thatexclude their clients from access to formal banking services.The findings imply that financial liberalization and bank restructuringin the African context should be accompanied by complementarymeasures to address institutional and structural problems, suchas contract enforcement and information availability, and toimprove the integration of informal and formal financial markets.     

Tax reforms and the underground economy: a simulation-based analysis

This paper studies the effects of several tax reforms in an economy where taxes are partially evaded by means of undeclared work. To this purpose, we consider a two-sector dynamic general equilibrium model calibrated to Italy which explicitly accounts for underground production. We construct various tax reform scenarios, such as ex ante budget-neutral tax shifts from direct to indirect taxes, and tax cuts on labor and business financed by decreases of government spending. Our results indicate that neglecting the existence of the underground sector may lead to severely miscalculating the macroeconomic effects of tax reforms. Further, the dimension of the underground sector is permanently and considerably reduced by changes in the tax mix that diminish the labor tax wedge. Reductions of the business tax prove to be highly expansionary in the presence of a sizable informal sector.     

The impact of mobile banking services on saving behavior in West Africa

This study analyzes the impact of the use of mobile banking services on saving behavior in West Africa. Using the Global Findex Database, 2017 and jointly estimating a multinomial logit model and a probit model, we find that the use of mobile banking services increases the likelihood of formal and informal saving by 2.4% and 0.83% respectively. Women are likelier to have informal savings, but their likelihood of having formal savings increases if they use mobile banking services. Greater education, employment (especially in the public sector), and income increase the likelihood of adopting mobile banking services. These results suggest that the partnership between mobile phone structures and financial institutions should be strengthened.     

Is there an employee-based gender gap in informal financial markets? International evidence

We study the impact of female production workers on firms' access to trade credits across the world. Using two sources of plausibly exogenous variations in gender bias and a difference-in-differences framework, we document that firms with more female production workers have less access to trade credits in countries with stronger gender beliefs that favor males. This relationship is largely driven by firms in industries with unexpected credit shortages and industries dominated by males. Since female firms rely more on informal finance, this study is relevant for policies that direct female firms towards formal credit markets in highly gender-biased places.     

Institutional influence on syndicate structure and cross‐border leveraged buyouts

We explore the extent to which differences in countries’ formal and informal institutions reduce cross‐border leveraged buyout transactions and the potential influence these same institutions have on how private equity (PE) investors choose to enter these transactions. Although institutional differences have frequently been viewed as barriers to cross‐border investment, we find evidence that these same differences may motivate a PE firm's decision to enter the transaction with a syndicate of firms rather than undertaking the transaction on their own. Cultural differences between a PE firm and the target nation are significantly related to the choice to enter the deal via a multinational syndicate. The varying nationalities within the syndicate contribute to enhanced familiarity, with average institutional distances between the syndicate and target firms being significantly lower than for single‐PE‐led deals. Overall, deals undertaken by syndicates are more likely to be successfully completed and require less time in negotiation. These results persist even after accounting for selection bias with regard to target country choice. We explore whether other features of the syndicate are responsible for improved deal outcomes, such as repeated transactions with the same partners, but find no evidence that this is the case.     

Social trust and corporate financial asset holdings: Evidence from China

This study examines the impact of social trust on firms’ holdings of non-currency financial assets using a large sample of firms in China’s real sector. We find that firms in regions of the high social trust hold fewer financial assets, consistent with the notion that credibility in high-trust regions reduces information asymmetry and transaction cost among market participants. This leads to better access to formal and informal financing and higher profitability for the real economy, eventually depressing firms’ financial asset allocations. We also find that the negative effect of social trust on financial asset holdings is more prominent for private firms and firms with weak internal monitoring from large shareholders, suggesting that corporations rely more on trust in these cases; it is less pronounced when firms are in regions with good legal systems, proving social trust to be a substitute for formal institutions.     

中国农村二元金融发展对农民收入影响的再考察——基于正规金融与非正规金融视角

基于正规金融与非正规金融视角,运用空间计量方法对2003-2010年中国31个省市农村二元分层金融发展的农民收入效应进行再考察。研究结果显示：农民收入、正规与非正规金融均存在显著的空间自相关性。正规与非正规金融的发展均有利于农民收入的增加,但是正规金融的影响效果不如非正规金融明显;农民收入、正规与非正规金融的空间变量对促进农民增收具有显著影响。     

正规金融与非正规金融:机制、效率与实证挑战

正规金融与非正规金融的定位和关系,不仅是重要的学术问题,也是影响间接金融体系改革方向的关键。本文从机制视角建立学理框架,从信息和履约两个基础维度,讨论正规金融与非正规金融的相对效率及决定因素,并通过系统梳理相关文献,指出现有实证研究的成果与挑战;进而结合中国特征,讨论如何提高正规金融与非正规金融的效率,最后提出未来研究方向。本文认为,正规金融与非正规金融因信息和履约机制不同而各有其独立存在价值,其相对效率取决于不同经济发展阶段的社会网络基础和征信、法律体系,现有实证文献对两者作用的分歧主要源于分类、样本局限和内生性处理。本文从机制视角进行分析,体现了正规金融和非正规金融的金融属性,为探索相关领域学术研究和政策制定提供启示。