Informality,public employment and employment protection in developing countries

This paper proposes an equilibrium matching model for developing countries’ labor markets where the interaction between public, formal private and informal private sectors are taken into account. Theoretical analysis shows that gains from reforms aiming at liberalizing formal labor markets can be annulled by shifts in the public sector employment and wage policies. Since the public sector accounts for a substantial share of employment in developing countries, this approach is crucial to understand the main labor market outcomes of such economies. Wages offered by the public sector increase the outside option value of the workers during the bargaining processes in the formal and informal sectors. It becomes more profitable for workers to search on-the-job, in order to move to these more attractive and more stable types of jobs. The public sector therefore acts as an additional tax for the formal private firms. Using data on workers’ flows from Egypt, we show empirically and theoretically that the liberalization of labor markets plays against informal employment by increasing the profitability, and hence job creations, of formal jobs. The latter effect is however dampened or even sometimes nullified by the increase of the offered wages in the public sector observed at the same time.     

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.     

Uhljeb – a post-socialist homo croaticus: a personification of the economy of favours in Croatia?

Party patronage combined with a collectivist culture appears to present a very resistant socialist legacy in Croatia. In-group favouritism and an overly bureaucratised system provide a fertile soil for uhljebs. An uhljeb is a public sector employee whose main ‘competence’ is membership of a political party or a nepotistic relationship. They now already count in the thousands, and often contribute to the further multiplication of uhljebs, and to an increase in clientelist arrangements. The practice of employing uhljebs both undermines and underpins the existing system. That ambivalence is one of the characteristics of the Russian sistema, and that is one of the important links to compare blat users and uhljebs, in addition to the practice of ‘pulling strings’. As key protagonists, uhljebs and blat users illustrate their own and society’s modus operandi: an intense ‘economy of favours’. Recent studies increasingly show that cultural variables influence economic outcomes and this article presents an extension of the ‘economy of favours’ into Croatia’s paradigm. Based on primary sources and international benchmarks, it provides a comparison of the cultural contexts of Eastern and Western European countries, and portrays a rising informal practice that, despite its omnipresence, has been under-researched in the academic literature.     

Urbanizing Refuge: Interrogating Spaces of Displacement

Refugee spaces are emerging as quintessential geographies of the modern, yet their intimate and everyday spatialities remain under‐explored. Rendered largely through geopolitical discourses, they are seen as biopolitical spaces where the sovereign can reduce the subject to bare life. In conceptualizing refugee spaces some scholars have argued that, although many camps grow and develop over time, they evolve their own unique form of urbanism that is still un‐urban. This article challenges this idea of the camp as space of pure biopolitics and explores the politics of space in the refugee camp using urban debates. Using case studies from the Middle East and South Asia, it looks at how the refugee spaces developed and became informalized, and how people recovered their agency through ‘producing spaces’ both physically and politically. In doing so, it draws connections between refugee camps and other spaces of urban marginality, and suggests that refugee spaces can be seen as important sites for articulating new politics.     

Informality,innovation, and aggregate productivity growth

This paper investigates how the costs of innovation in the formal sector temper or magnify the impacts of traditional policy levers such as taxation on sectoral choice. I embed a decision whether to operate formally or informally into a richer, general equilibrium model. Formal firms are subject to taxation, but they can improve their productivity through process innovation. Informal firms can potentially avoid taxation, and their productivity is determined by productivity growth in the formal sector. I find that changing tax rates from 50% to 60% decreases formal‐sector participation by 20.9%; however, this percentage falls by 10% when the cost of innovation is lower in the formal sector. The model also illustrates how changes in tax policy affect total factor productivity growth by limiting both the number of formal‐sector firms and the intensity of innovation. These results indicate a potential mechanism to induce firms to operate formally or mitigate harmful impacts of necessary tax changes.     

Government policy in the formal and informal sectors

The paper quantitatively investigates, in general equilibrium, the interaction between the firms' choice to operate in the formal or the informal sector and government policy on taxation and enforcement, given a level of regulation. A static version of Ghironi and Melitz's (2005) industry model is used to show that firms with lower productivity endogenously choose to operate in the informal sector. I use cross-country data on taxes, measures of informality, and measures of regulation (entry and compliance costs, red tape, etc.) to back out how high the enforcement levels must be country by country to make the theory match the data. The welfare gains from policy reforms are on average 1.2% (measured in terms of consumption) for OECD countries. I also find that the welfare gains from reducing regulation are on average 2.1%. Finally, performing a similar decomposition to that of Hall and Jones (1999), I find that distortions associated with informality account for a factor of 1.5 of the output per capita difference between the richest and the poorest countries.     

探讨香港-珠江三角洲的联系：跨界的制度多样性如何促进电子企业的竞争力

基于灵活性的假设下，香港和珠三角两地的企业问卷调查表明，为了应对商业环境变化对灵活性的需求，香港客户对珠三角供应商关系调整了管治模式，逐渐采取股权或非股权合作代替原先的完全控股。而在香港企业寻找新的客户、选择适当的生产合作伙伴方面，正式和非正式制度之间存在互补性。研究结果证实，在现有的正式制度框架内充分应用非正式因素，可提高企业更灵活应对政治和商业环境迅速变化的能力，以维持在全球市场的竞争力。     

Urban Informality and the State: Geographical Translations and Conceptual Alliances

Understandings of informality commonly derive from research undertaken in states perceived as lacking the capacity to regulate the practices of their populations. This Interventions forum aims to expand the geographical parameters of empirical research on urban informality. A more global approach, we argue, also necessitates questioning assumptions that undergird this concept—in particular the underlying conception of the state. In this vein, this collection of papers aims to rethink theories of the state through the lens of informality, and vice versa, to inform and refine the concept of informality through a more thorough understanding of states. In so doing, the contributions engage with concepts that have been central both to theories of the state and to the study of informality, namely governance, agency, legitimacy, sovereignty and legality. Following this introduction setting out our theoretical approach, the Interventions forum unites five empirical studies that discuss the nexus of informality and states in contexts that have been researched less extensively from this perspective, each tackling one of the above‐mentioned concepts. Based on these different entry points, the papers provide novel angles on a state‐theoretical understanding of informality. A concluding essay brings these approaches together, reflecting on the possibilities of translating concepts to different sites.     

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.     

For the Environment: An Assessment of Recent Military Intervention in Informal Gold Mining Communities in Ghana

This article reflects critically on the impacts of the recent ban on artisanal and small-scale mining (ASM) – low-tech, labour-intensive mineral extraction and processing – in Ghana. Government officials claimed that a ban was necessary because the country’s ASM activities, most of which are found in the informal economy, pose a serious threat to local waterbodies and that security forces were needed for its enforcement. It is argued here, however, that projecting the ban and associated military intervention as actions taken specifically to protect the environment has helped the government escape scrutiny over its choice of strategy to combat illegal mining. Perhaps more importantly, it has masked what may be the real reasons behind these moves: 1) to help the government regain control of the purchasing side of an ASM sector that is now heavily populated and influenced by foreigners; and 2) to put it in an improved position to demarcate parcels of land to the multinational mineral exploration and mining companies that supply it with significant quantities of revenue in the form of taxes, royalties and permit fees.