Tanzanian formal sector workers' participation in informal production |
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Authors: | Theis Theisen |
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Affiliation: | Department of Economics and Business Administration , School of Management , Agder University College , Norway E-mail: Theis.Theisen@hia.no |
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Abstract: | 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. |
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