ECONIS Select – Escaping the Informal-Employment Trap in Developing Countries

06/2010

Selected for the Global Economic Symposium 2010

Informality is a way of life throughout the developing world. In poor Sub-Saharan African countries, the informal sector employs the vast majority of the non-agricultural labor force. Informal jobs continue to account for a high share of employment in the middle-income Latin American countries, pointing to the persistence of the phenomenon. The current economic crisis is likely to cause a further surge of informal employment due to job losses in the formal sector.

Even though informality appears in many different guises, informal workers tend to have in common that they earn less than formal workers and that their basic rights are more vulnerable and difficult to defend. Informality can be a major cause of poverty as most informal workers are insufficiently protected from illness and health problems, unsafe working conditions and possible loss of earnings due to sudden dismissal.

Persistently high levels of informal employment also reduce fiscal revenues and the state’s capability to develop social security systems. When it comes to devising strategies that help overcome the informal-employment trap, a number of questions arise.

• Should formalization always be the ultimate objective, or are measures that raise the productivity of informal workers and provide them with basic social protection equally important?
• Do high labor costs and restrictions in the formal labor market constitute insurmountable entry barriers, suggesting a need for labor market reforms?
• Does the tax system give rise to widespread tax evasion?
• Could more secure property rights lead to a pathway out of poverty for informal entrepreneurs?

Literature selected from our database ECONIS:

• Article: Employment, poverty and inclusive development in Africa: policy, choices in the context of widespread informality / James Heintz
  In: The political economy of Africa. - London u.a.: Routledge, ISBN 0-415-48038-8. - 2010, S. 199-213
  Subject heading: Economy / Economic development / Economic Growth / Informal sector / Poverty / Employment policy / Economic policy / Africa
• Title: The returns to formality and informality in urban Africa / Paolo Falco, Andrew Kerr, Neil Rankin, Justin Sandefur and Francis Teal
  Published: Oxford: Centre for the Study of African Economies, 2010
  Subject heading: Wage structure / Urban labour market / Human capital / Ghana / Tanzania
  Link: http://www.csae.ox.ac.uk/workingpapers/pdfs/2010-03text.pdf
• Article: Africa's urban revolution and the informal economy / Keith Hart
  In: The political economy of Africa. - London u.a.: Routledge, ISBN 0-415-48038-8. - 2010, S. 371-388
  Subject heading: Economy / Economic development / Urban development / Informal sector / Economic Growth / Economic policy / Africa
• Article: Labor market reform and poverty: the role of informal sector / Sugata Marjit; Saibal Kar; Dibyendu Sundar Maiti
  In: New and enduring themes in development economics. - Singapore: World Scientific, ISBN 981-283941-0. - 2009, S. 229-240
  Subject heading: Labour Market Policy / Poverty / Informal sector / Theory / India
• Title: Informal taxation / Benjamin A. Olken; Monica Singhal
  Published: Cambridge, Mass.: Harvard Univ., John F. Kennedy School of Government, 2009
  Subject heading: Informal sector / Public Finance / Tax Policy / Tax revenues / Developing countries / 2007
  Link: http://web.hks.harvard.edu/publications/workingpapers/citation.aspx?PubId=6852
• Article: The effects of labour market policies in an economy with an informal sector / James Albrecht, Lucas Navarro and Susan Vroman
  In: The economic journal . - Oxford u.a.: Blackwell, ISSN 1468-0297, ZDB-ID 30259. - Bd. 119.2009 (Jul.)=Nr. 539, S. 1105-1129
  Subject heading: Labour Market Policy / Informal sector / Dual labour market / Theory
• Article: The unofficial economy and economic development / Rafael La Porta; Andrei Shleifer
  In: Brookings papers on economic activity. - Washington, DC: Inst., ISSN 0007-2303, ZDB-ID 1870087. - 2008, Fall, S. 275-363
  Subject heading: Informal sector / Firm size / Productivity / Dual economy / Developing countries / 1996-2007
• Article: Urbanization, informal sector, and development / Kazuhiro Yuki
  In: Journal of development economics. - Amsterdam: Elsevier, ISSN 0304-3878, ZDB-ID 1871171. - Bd. 84.2007, 1, S. 76-103
  Subject heading: Urbanization / Informal sector / Income distribution / Economic development / Theory
• Title: Linking the formal and informal economy: concepts and policies / ed. by Basudeb Guha-Khasnobis; Ravi Kanbur and Elinor Ostrom
  Published: Oxford u.a.: Oxford Univ. Press, 2006
  Subject heading: Informal sector / Developing countries
  Links:
  http://www.loc.gov/catdir/toc/ecip0610/2006008896.html
  http://www.loc.gov/catdir/enhancements/fy0725/2006008896-b.html
  http://www.loc.gov/catdir/enhancements/fy0725/2006008896-d.html
• Title: Economic growth and poverty: does formaliation of informal enterprises matter? / GIGA Research Program Transformation in the Process of Globalization. German Inst. of Global and Area Studies
  Published: Hamburg: GIGA, 2006
  Subject heading : Economic Growth / Poverty / Poverty alleviation / Informal sector / Small and medium-sized enterprises / Hidden economy / Corporate performance / Developing countries
  Link:
  http://www.giga-hamburg.de/dl/download.php?d=/content/publikationen/pdf/wp20_ishengoma-kappel.pdf
  Request info: - Available
• Article: Urban informal sector and poverty / Saibal Kar; Sugata Marjit
  In: International review of economics & finance . - Amsterdam u.a.: Elsevier, ISSN 1059-0560, ZDB-ID 11374767. - Bd. 18.2009, 4, S. 631-642
  Subject heading: Trade liberalization / Informal sector / Wage level / Urban poverty / India / 1984-2001
• Article: The oxymoron of informal sector: a framework for conceptualising informal sector as enabler of economic development in developing countries / Aihie Osarenkhoe
  In: Journal of international business and economics. - S.I.: IABE, ISSN 1544-8037, ZDB-ID 25292936. - Bd. 9.2009, 1, S. 118-131
  Subject heading: Informal sector / Dual economy / Economic development / Developing countries
• Title: A note on informality in the labor market / Melanie Khamis
  Published: Bonn: IZA, 2009
  Subject heading: Moonlighting / Labour Market / Informal sector / Mexico
  Link: http://ftp.iza.org/dp4676.pdf
• Title: Does formality improve micro-firm performance?: quasi-experimental evidence from the Brazilian SIMPLES program / Pablo Fajnzylber; William F. Maloney; Gabriel V. Montes-Rojas
  Published: Bonn: IZA, 2009
  Subject heading: Small and medium-sized enterprises / Self-employed / Tax / Social security contribution / Tax incentive / Informal sector / Legalization / Brazil
  Link: http://ftp.iza.org/dp4531.pdf
• Article: Informality, employment and economic development in the Arab World / Ibrahim Elbadawi; Norman Loayza
  In: Magallat at-tanm¯iya wa-'s-siy¯as¯at al-iqtis¯ad¯iya. - Safat, Kuwait, ISSN 1561-0411, ZDB-ID 2050990X. - Bd. 10.2008, 2, S. 25-75
  Subject heading: Informal sector / Arab countries
• Title: Is informality bad?: evidence from Brazil, Mexico and South Africa / Olivier Bargain; Prudence Kwenda
  Published: Bonn: IZA, 2010
  Subject heading: Wage structure / Dual labour market / Informal sector / Self-employed / Employees / Estimation / Newly industrializing countries / Brazil / Mexico / South Africa
  Link: http://ftp.iza.org/dp4711.pdf
• Article: Labour standards and informal employment in Latin America / Rossana Galli and David Kucera
  In: In defence of labour market institutions. - Basingstoke, Hampshire u.a.: Palgrave Macmillan u.a., ISBN 0-230-53805-3. - 2008, S. 192-217
  Subject heading: Labour Market / Labour Market Policy / Institutional infrastructure / Working conditions / Hidden economy / Employment / Latin America
• Article: Informality in Latin America and the Caribbean / Norman V. Loayza, Luis Servén, and Naotaka Sugawara
  In: Business regulation and economic performance. - Washington, DC: World Bank, ISBN 978-0-8213-7407-8. - 2010, S. 157-196
  Subject heading: Informal sector / Latin America / Caribbean countries
• Article: Modelling poverty dimensions of urban informal sector operators in a developing economy / Mahendra Reddy
  In: The European journal of development research. - Basingstoke: Palgrave Macmillan, ISSN 0957-8811, ZDB-ID 10453076. - Bd. 19.2007, 3, S. 459-479
  Subject heading: Urban poverty / Informal sector / Developing countries
• Article : Informal self-employment and macroeconomic fluctuations / Norbert M. Fiess; Marco Fugazza; William F. Maloney
  In: Journal of development economics. - Amsterdam: Elsevier, ISSN 0304-3878, ZDB-ID 1871171. - Bd. 91.2010, 2, S. 211-226
  Subject heading: Labour Market / Purchasing power parity / Shock / Economic adjustment / Dual economy / Informal sector / Theory / Argentina / Brazil / Colombia / Mexico
• Title: Asian informal workers: global risks, local protection / ed. by Santosh Mehrotra and Mario Biggeri
  Published: London u.a.: Routledge, 2007
  Subject heading: Informal sector / Homeworking / Hidden economy / Child labour / Social conditions / Poverty / Rural small business / Asia / 1980-2000
  Link: http://www.gbv.de/dms/spk/sbb/recht/toc/503806846.pdf
• Title: Changes in informal employment with economic development: evidence from Asian countries / Sachiko Kazekami
  Published: Nagoya, 2009
  Subject heading: Informal sector / Employment / Economic development
• Title: The informal sector in developing countries: output, assets and employment / Sangeeta Pratap and Erwan Quintin
  Published: Nov. 2006
  Subject heading: Informal sector / Theory / Developing countries
  Link: http://www.wider.unu.edu/publications/rps/rps2006/rp2006-130.pdf
• Article: Labor productivity growth, informal wage, and capital mobility: a general equilibrium analysis / Sugata Marjit and Saibal Kar
  In: Labour markets and economic development. - London u.a.: Routledge, ISBN 0-415-77741-0. - 2009, S. 286-298
  Subject heading: Labour Market / Labour productivity / Wage level / Informal sector / Capital mobility / Economic development / General equilibrium
• Article: Economic growth and poverty reduction: what role for the informal economy? / Ute Rietdorf
  In: Private sector development and poverty reduction. - Leipzig: Univ., Sept, ISBN 3-934693-19-9. - 2006, S. 14-25
  Subject heading: Economic Growth / Poverty alleviation / Informal sector / Developing countries