What policies to combat labour informality? Evidence from Mexico

Informality often concerns policymakers due to its negative implications on productivity and poverty. In recent years, the extent of informal employment has diverged across Mexican states. Varying informal employment dynamics within a comparable institutional environment offers scope to identify policies that can reduce informality. This paper uses cross-state panel and individual data to examine the determinants of informal employment, exploiting the diverging outcomes across states, industries and time. The results suggest that there is no ‘silver bullet’ to combat informality, yet a package of policies promoting labour skills, encouraging foreign investment, enhancing tax enforcement and deterring corruption can reduce informal employment. Intriguingly, reducing the cost to start a business is found to have a non-linear effect on informal employment, conditional on the prevalence of microenterprises.     

Informality and productivity in the labor market in Peru

This article analyzes the evolution of informal employment in Peru from 1986 to 2001.

Contrary to what one would expect, the informality rates increased steadily during the 1990s despite the introduction of flexible contracting mechanisms, a healthy macroeconomic recovery, and tighter tax codes and regulation. We explore different factors that may explain this upward trend including the role of labor legislation and labor allocation between/within sectors of economic activity. Finally, we illustrate the negative correlation between productivity and informality by evaluating the impacts of the Youth Training PROJOVEN Program that offers vocational training to disadvantaged young individuals. We find significant training impacts on the probability of formal employment for both males and females.     

Urban informal sector and poverty

Many studies have explored the connection between trade and poverty theoretically and empirically for the developing world. We offer another look at the possible implications of trade liberalization on urban poverty by using the urban informal sector as a catalyst. The theory shows that trade liberalization in the import competing sector raises informal wage across occupational types, and expands production and employment in the informal industrial segment. Further, using Indian provincial data on wage, capital stock and value added in the informal sector we show that real informal wage increased with trade reform and transmitted favorable impact on urban poverty reduction.     

Informal employment relationships and the labor market: Is there segmentation in Ukraine?

One of the most important factors that determine individuals’ quality of life and wellbeing is their position in the labor market and the type of jobs that they hold. When workers are rationed out of the formal segment of the labor market against their will, i.e., the labor market is segmented, their quality of life is limited, and their wellbeing is reduced. When they can freely choose between a formal or informal employment relationship, i.e., the labor market is integrated, their wellbeing can reach high levels even in the presence of informal employment. We, therefore, test whether the Ukrainian labor market is segmented along the formal-informal divide, slicing the data by gender and age. The analysis that we perform consist in the analysis of short-term and medium-term transitions between five employment states, unemployment and inactivity. We also analyze wage gaps of mean hourly earnings and across the entire hourly earnings distribution, controlling for time-invariant unobserved heterogeneity. According to our results segmentation is present for dependent employees: for a large part of informal employees informal employment is used as a waiting stage to enter formal salaried employment and is not voluntarily chosen. As far as self-employment is concerned the evidence is mixed regarding segmentation in the Ukrainian labor market. This heterogeneity in outcomes implies that not all informal work is associated with a low quality of life and reduced wellbeing in post-transition economies.     

Labor Informality: Choice or Sign of Segmentation? A Quantile Regression Approach at the Regional Level for Colombia

The labor market in developing countries is remarkably heterogeneous, with a small productive formal sector characterized by high wages and attractive employment conditions, and a large informal sector characterized by low productivity and volatile wages. The informal sector is particularly diverse. In this paper, we examine the heterogeneity of the informal sector at the regional level in Colombia. In general, our findings suggest that both voluntary and involuntary informal employment co‐exist by choice and as a consequence of labor market segmentation. We also find that there are striking differences in labor market characteristics across cities, particularly with respect to informal employment.     

Informal parental care and female labour supply in Japan

Using the Japanese Study of Aging and Retirement, Japan’s first globally comparable panel survey of the elderly, we estimate the effect on female employment in Japan due to the provision of informal parental care. We observe that informal parental care has little impact on female employment, after controlling for endogeneity of informal care or individual unobserved time-invariant heterogeneity. This finding is consistent with those observed in Europe and the US, underscoring a limited association between care and work in Japan, which is facing ageing at the fastest pace among advanced economies.     

Recent decline in wage inequality and formalization of the labour market in Argentina

Labour market conditions improved during the 2000s in Latin America, a process that included a reduction in the magnitude of informal employment. A decline of wage inequality was another feature of this period. Both dynamics were particularly intense in Argentina. The purpose of this study is to evaluate the role played by the process of formalization of the labour market that occurred in Argentina during that period on the reduction of income inequality, while additionally taking into account other factors that might have also contributed to such dynamics of income inequality. The method employed is a decomposition proposed by Firpo, Fortin and Lemieux, which allows extending the Oaxaca-Blinder approach to decompose some distributive statistics of income between a ‘composition effect’ and a ‘returns effect’. The study concludes that the process of increasing labour market formalization had an equalizing effect over the period, a finding that had not been emphasized in previous studies.     

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.

     

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.     

Gender,entrepreneurship and food security in Niger

In many African countries, the income generated from the informal sector and the entrepreneurship is particularly important for reducing poverty. Previous studies have not found clear evidence on the relationship between self‐employment by gender and food security. We argue that this may be a result of the gender inequality in resource accessibility. In this paper, we analyze the implication of household entrepreneurship on food security in Niger, where gender disparities in resource accessibility are reduced. We find that owning female‐managed non‐agricultural enterprises is positively related to food accessibility and food availability within female‐headed households. The results draw the attention on reducing gender differences in resource accessibility in entrepreneurship for improving food security.     

Informal Employment and the Structure of Wages in India: A Review of Trends

The “alternative”, “atypical” or “informal” workforce has grown in developed and developing countries alike. One of the more recent evolutions of informal employment has been of informal employment within formal enterprises. In the interest of flexibility and cost‐reduction, many formal firms increasingly resort to hiring workers on a temporary or informal basis. Alongside, and perhaps, as a result of the persistence and pervasiveness of informal employment, issues relating to inequality have come to the fore. This paper is motivated by these two intertwining aspects of Indian labor market—informality and wage inequality. Using nationally representative sample data, the paper examines trends in wage inequality among various forms of informal workers, overlaying these findings with broader trends in inequality. Using a regression based inequality decomposition, the paper compares the sources of wage inequality across different employment groups and the reasons for differences in wage inequality.     

Informal employment in developing countries : Opportunity or last resort?

There is an ongoing debate among researchers and policy makers, whether informal sector employment is a result of competitive market forces or labor market segmentation. More recently it has been argued that none of the two theories sufficiently explains informal employment, but that the informal sector shows a heterogenous structure. For some workers the informal sector is an attractive employment opportunity, whereas for others - rationed out of the formal sector - the informal sector is a strategy of last resort. To test the empirical relevance of this hypothesis we formulate an econometric model which allows for several unobserved segments within the informal sector and apply it to the urban labor market in Côte d'Ivoire.     

Increasing wage dispersion and the changes in relative employment and wages in Mexico's urban informal sector: 1987-1993

This study analyses the role of changes in informal/formal relative employment, wage levels and wage inequality in explaining increasing wage dispersion in Mexico during the 1987–1993 period. From 1987 to 1993, the variance of the log of hourly wages for Mexican workers increased by more than 50 per cent. Using data from the Encuesta nacional de empleo urbano we find that this increase in the overall wage dispersion was mainly driven by increasing wage dispersion in the formal sector coupled with a faster growth in formal sector employment as a percentage of total employment. However, compression in the distribution of wages within the informal sector contributed to substantially slowdown the increasing overall wage inequality. About 60 per cent of the 1987–1993 4.65 percentage point reduction in the informal sector share of total employment is explained by changes in the structure that determines sectoral employment; the rest is explained by changes in the composition of the labour force, particularly increases in the sectoral education gap and a change in the regional relative share of sectoral employment. Also, from 1987 to 1993 the sectoral wage ratio increased from 0.59 to 0.63. It seems that a relative improvement in unobserved skills in the informal sector helped to close the wage differential but this effect was partially offset by an increase in the relative prices of both observed and unobserved skills, as well as increases in relative observed skills in the formal sector, particularly education.     

Informality and mobility

Informality is a defining characteristic of labour markets in developing and transition countries. This paper analyzes patterns of mobility across different forms of formal and informal employment in Russia. Using the Russian Longitudinal Monitoring Survey household panel we estimate a dynamic multinomial logit model with individual heterogeneity and correct for the initial conditions problem. Simulations show that structural state dependence is weak and that transition rates from informal to formal employment are not lower than from non-employment. These results lend support to the integrated view of the labour market.     

Informal Employment and the Role of Regional Governance

The aim of this paper is to provide an explanation to why the degree of informal employment may vary substantially between different regions within a country. In Brazil, 45% of workers in the urban labor force are employed informally. The degree of informal employment, however, varies substantially across regions, with some cities having 20% and others having 80% or more of their labor force in the informal sector. The hypothesis assessed here is that the quality of local governance—or government effectiveness—affects the decisions of workers and businesses as to whether to participate in the formal or the informal sector. The empirical analysis, based on data from 5500 Brazilian municipalities, shows that informal employment is lower in regions with better governance, higher average education, and with a relatively large manufacturing sector. Endogeneity concerns are addressed as part of a series of robustness checks of the results.     

HETEROGENEITY OR TRUE STATE DEPENDENCE IN POVERTY: THE TALE TOLD BY TWINS

The purpose of this study is to distinguish between two different reasons that poverty could persist on an individual level. This study takes advantage of the similarity within pairs of identical twins to separate family‐specific heterogeneity from true state dependence, where the experience of poverty leads to a higher risk of future poverty. The results, based on a four‐variate probit model, show the importance of true state dependence in poverty. When using a poverty measure based on disposable income, family‐specific heterogeneity explains between 21 and 25 percent of poverty persistence in the Swedish sample of twins.     

社会变迁与边缘化人群的能力再造

我国正在经历重大社会转型,社会变迁形成了很多边缘化人群.如因工程建设而形成的大量非自愿移民,这些受到直接冲击的人群和其他受到重大经济社会政策影响的人群如下岗职工,他们都经历着直接的职业、环境等多方位的改变.并承受着因为社会政策和外来力量的介入导致的失业、贫困等问题.本文以南水北调中线工程为研究对象,认为社会变迁通过影响正规和非正规人力资本失效,致使移民人群能力受损,进而导致介入型贫困.在社会变迁的过程中,应该高度重视边缘化人群的能力再造问题,实现从人力资本投资到能力建设的转变.     

"城中村"非正规部门形成发展机制——以深圳市蔡屋围为例

非正规部门以其就业门槛低、方便灵活等特点成为城市边缘阶层就业和消费的主要部门,“城中村”既是城市低收入群体和流动人口的聚居区,也是非正规部门相对集中的区域。文章通过对位于深圳市中心区的“城中村”———蔡屋围的案例研究,探讨了非正规部门非正规化、半正规化和正规化的三种发展过程及其形成原因和内在机制,指出由于现阶段“城中村”特殊的经济社会体系和管理体制以及非正规部门在城市发展中承担着为低收入人口提供就业和服务的特殊功能,城市政府应降低门槛,允许非正规部门以非正规化的形式存在,但应纳入管理;对处于不同发展阶段的非正规部门采取不同的政策,使之有序发展,最终步入正规化的轨道。     

The participation of Russian households in the informal economy: Evidence from the VTsIOM data

This study presents the size and structure of secondary employment in Russia, analyses the determinants of Russian informal secondary employment, and discusses differences between job qualifications in a main job and those in a secondary job. We estimate that 27 percent of Russia’s GDP was produced in the informal economy during 1997–98 and informal secondary employment amounts to about 20 percent of value added produced in the informal economy. We found that the probability of holding an informal secondary job as opposed to a formal one is positively associated with higher wage rates and lower education. However, there is little evidence that low income is correlated with holding an informal secondary job. We also found evidence that an informal secondary job requires lower job qualifications as compared to a formal one. Again, low income is not significant in determining differences between job qualifications in a main job and those in a secondary job. JEL classification: J22, J24, O17, P20.     

The quality of employment in India's services sector: exploring the heterogeneity

For some observers, the dramatic growth of the services sector in India reflects rapid strides made by educated professionals. Some others see it as the expansion of an employer of last resort. Given this heterogeneity, the object of this article is to analyse the quality of employment being created in different sub-sectors of services, relative to the industrial sector, where quality is defined to include wages, job security and social protection. Analysing household survey data from India in 1993–94 and 2004–05, we find the following. First, sub-sectors of services are generally either 'good' or 'bad' employers – higher wages do not compensate for less job security or less job protection. Second, the classification of most service sub-sectors as 'good' or 'bad' employers in 2004–05 is the same as that in 1993–94. Third, employment expansion during the 10-year period under consideration is more in service sub-sectors where quality of employment is low.