Informality Trends and Cycles

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collection.link.5
https://openknowledge.worldbank.org/handle/10986/9
collection.name.5
Policy Research Working Papers
dc.contributor.author
Loayza, Norman V.
dc.contributor.author
Rigolini, Jamele
dc.date.accessioned
2012-06-22T20:10:22Z
dc.date.available
2012-06-22T20:10:22Z
dc.date.issued
2006-12
dc.date.lastModified
2021-04-23T14:02:41Z
dc.description.abstract
This paper studies the trends and cycles of informal employment. It first presents a theoretical model where the size of informal employment is determined by the relative costs and benefits of informality and the distribution of workers' skills. In the long run, informal employment varies with the trends in these variables, and in the short run it reacts to accommodate transient shocks and to close the gap that separates it from its trend level. The paper then uses an error-correction framework to examine empirically informality's long- and short-run relationships. For this purpose, it uses country-level data at annual frequency for a sample of industrial and developing countries, with the share of self-employment in the labor force as the proxy for informal employment. The paper finds that, in the long run, informality is larger in countries that have lower GDP per capita and impose more costs to formal firms in the form of more rigid business regulations, less valuable police and judicial services, and weaker monitoring of informality. In the short run, informal employment is found to be counter-cyclical for the majority of countries, with the degree of counter-cyclicality being lower in countries with larger informal employment and better police and judicial services. Moreover, informal employment follows a stable, trend-reverting process. These results are robust to changes in the sample and to the influence of outliers, even when only developing countries are considered in the analysis.
en
dc.identifier
http://documents.worldbank.org/curated/en/2006/12/7245835/informality-trends-cycles
dc.identifier.uri
http://hdl.handle.net/10986/8855
dc.language
English
dc.language.iso
en_US
dc.publisher
World Bank, Washington, DC
dc.relation.ispartofseries
Policy Research Working Paper; No. 4078
dc.rights
CC BY 3.0 IGO
dc.rights.holder
World Bank
dc.rights.uri
http://creativecommons.org/licenses/by/3.0/igo/
dc.subject
ABSOLUTE DIFFERENCE
dc.subject
ACTIVE LABOR
dc.subject
ADVERSE SELECTION
dc.subject
AGGREGATE OUTPUT
dc.subject
BUSINESS CYCLE
dc.subject
COMPARATIVE ANALYSIS
dc.subject
COUNTRY CHARACTERISTICS
dc.subject
COUNTRY DUMMY
dc.subject
COUNTRY-BY-COUNTRY BASIS
dc.subject
CUMULATIVE FUNCTION
dc.subject
DATA SET
dc.subject
DEPENDENT VARIABLE
dc.subject
DEVELOPED COUNTRIES
dc.subject
DEVELOPING COUNTRIES
dc.subject
DEVELOPMENT ECONOMICS
dc.subject
DISCUSSIONS
dc.subject
DISEQUILIBRIUM
dc.subject
ECONOMIC ACTIVITY
dc.subject
ECONOMIC GROWTH
dc.subject
ELASTICITY
dc.subject
EMPIRICAL ANALYSIS
dc.subject
EMPIRICAL EVIDENCE
dc.subject
EMPIRICAL FINDINGS
dc.subject
EMPIRICAL MODEL
dc.subject
EMPIRICAL SECTION
dc.subject
EMPLOYMENT GROWTH
dc.subject
EMPLOYMENT RATE
dc.subject
ENTRY COSTS
dc.subject
EQUILIBRIUM
dc.subject
EQUILIBRIUM LEVEL
dc.subject
EXOGENOUS VARIABLE
dc.subject
EXPLANATORY POWER
dc.subject
EXPLANATORY VARIABLE
dc.subject
GDP
dc.subject
GDP PER CAPITA
dc.subject
GOVERNMENT EXPENDITURES
dc.subject
GROSS INCOME
dc.subject
GROWTH RATE
dc.subject
INCOME
dc.subject
INCOME LEVELS
dc.subject
INEQUALITY
dc.subject
INFORMAL ECONOMIES
dc.subject
INFORMAL ECONOMY
dc.subject
INFORMAL EMPLOYMENT
dc.subject
INFORMAL LABOR MARKETS
dc.subject
INFORMAL SECTOR
dc.subject
INTEREST RATES
dc.subject
LABOR FORCE
dc.subject
LABOR MARKET
dc.subject
LABOR ORGANIZATION
dc.subject
LABOR TURNOVER
dc.subject
LATIN AMERICAN
dc.subject
LONG-RUN EQUILIBRIUM
dc.subject
LONG-RUN GROWTH
dc.subject
MACROECONOMIC SHOCKS
dc.subject
MARGINAL COST
dc.subject
MIDDLE INCOME COUNTRIES
dc.subject
MINIMUM WAGE
dc.subject
MINIMUM WAGES
dc.subject
MONETARY ECONOMICS
dc.subject
MORAL HAZARD
dc.subject
NATIONAL INCOME
dc.subject
NEGATIVE SHOCKS
dc.subject
NEGATIVE SIGN
dc.subject
OPPORTUNITY COST
dc.subject
PER CAPITA GROWTH
dc.subject
POLICY RESEARCH
dc.subject
POLITICAL ECONOMY
dc.subject
POSITIVE SHOCKS
dc.subject
PREVIOUS SECTION
dc.subject
PRIVATE AGENTS
dc.subject
PRODUCTIVITY
dc.subject
PRODUCTIVITY DIFFERENTIAL
dc.subject
PRODUCTIVITY INCREASES
dc.subject
PRODUCTIVITY LEVEL
dc.subject
PUBLIC ECONOMICS
dc.subject
PUBLIC POLICY
dc.subject
PUBLIC SERVICES
dc.subject
REAL EXCHANGE RATE
dc.subject
RELATIVE EARNINGS
dc.subject
SELF EMPLOYED
dc.subject
SELF EMPLOYED WORKERS
dc.subject
SELF EMPLOYMENT
dc.subject
SERIES DATA
dc.subject
SERIES OBSERVATIONS
dc.subject
SKILL LEVEL
dc.subject
SMALL MANUFACTURING
dc.subject
TAXATION
dc.subject
TOTAL EMPLOYMENT
dc.subject
TOTAL WORKERS
dc.subject
WORK IN PROGRESS
dc.subject
WORKER
dc.subject
WORKERS
dc.subject
WORKING
dc.title
Informality Trends and Cycles
en
okr.crosscuttingsolutionarea
Jobs
okr.doctype
Publications & Research :: Policy Research Working Paper
okr.doctype
Publications & Research
okr.docurl
http://documents.worldbank.org/curated/en/2006/12/7245835/informality-trends-cycles
okr.globalpractice
Macroeconomics and Fiscal Management
okr.globalpractice
Social Protection and Labor
okr.globalpractice
Poverty
okr.googlescholar.linkpresent
yes
okr.identifier.doi
10.1596/1813-9450-4078
okr.identifier.externaldocumentum
000016406_20061205153005
okr.identifier.internaldocumentum
7245835
okr.identifier.report
WPS4078
okr.language.supported
en
okr.pdfurl
http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2006/12/05/000016406_20061205153005/Rendered/PDF/wps4078.pdf
en
okr.topic
Economic Theory and Research
okr.topic
Social Protections and Labor :: Labor Markets
okr.topic
Work and Working Conditions
okr.topic
Social Protections and Labor :: Labor Standards
okr.topic
Poverty Reduction :: Inequality
okr.topic
Macroeconomics and Economic Growth
okr.unit
Development Research Group (DECRG)
okr.volume
1 of 1

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