Informality and bank stability

Liu-Evans, Gareth; Mitra, Shalini

doi:10.1016/j.econlet.2019.06.012

Cited by 7 publications

(2 citation statements)

References 42 publications

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“…Using 49 years (1960–2009) of panel data for 161 countries, Berdiev and Saunoris (2016) find a negative association between financial development and informality. The study by Liu‐Evans and Mitra (2019) finds that financial development and informal employment are negatively related. Finally, taking 41 sub‐Saharan countries as a case study and using an unbalanced panel data set over the period 1991–2015, and applying different econometric techniques, Njangang et al (2020) investigate the impact of financial development on the informal economy.…”

Section: Informal Economy Financial Development and Remittances: Thmentioning

confidence: 99%

“…Broadly speaking, the current study is mainly related to two strands of the literature. First, it is related to the studies that examine the linear relationship between financial development and informal economy (Capasso & Jappelli, 2013; Bittencourt et al, 2014; Berdiev & Saunoris, 2016; and Liu‐Evans & Mitra, 2019). Second, it is also closely linked to studies, finding mixed results on the remittances–informal economy nexus (Ivlevs, 2016; Chatterjee & Turnovsky, 2018; Schneider et al, 2019; Kelmanson et al, 2019); and Canelas, 2018).…”

Section: Introductionmentioning

confidence: 99%

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Do remittances moderate financial development–informality nexus in North Africa?

Akçay

Karabulutoğlu

2021

African Development Review

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The prevalent informality and sheer size of international remittances characterize the North African countries. This study primarily aims at investigating how remittances moderate the effects of financial development on the informal economy in North African countries. Employing pool mean group (PMG)/panel ARDL approach and a balanced panel data set over the period 1980-2015, we find that remittances moderate the negative relationship between financial development and informal economy. This finding suggests that remittances bolster financial development, which, in turn, decreases the informal economy. Based on this result, we recommend that tailored policies and interventions are needed to promote financial development and international remittances in the North African region. 1 | INTRODUCTION Informality, or the informal economy, defined as "all economic activities by workers and economic units that are-in law or practice-not covered or insufficiently covered by formal arrangements" (OECD & ILO, 2019, p. 155), is a common issue that countries face all over the world, particularly developing countries. From the definition, it is clear that informality mainly manifests itself in production and employment. Indeed, according to Loayza (2016), over 70% of employment and 30% of production take place in the informal sector in a typical developing country. On a global scale, the informal economy accounts for 13% of world GDP, corresponding to US$10 trillion (Lewis, 2016). In terms of employment, two billion people, equivalent to about 62.1% of the working-age population, are informally employed in the world (ILO, 2018, p. 13). Finally, OECD and ILO (2019) estimates that 81% of all enterprises operate in the informal sector in the world. High levels of informal economy place an increasing strain on the formal economy and impede economic development and inclusive economic growth, particularly in developing countries. That said, the informal economy adversely affects a developing economy in several ways. First, it erodes the tax base and therefore undermines fiscal sustainability (

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Section: Informal Economy Financial Development and Remittances: Thmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Do remittances moderate financial development–informality nexus in North Africa?

Akçay

Karabulutoğlu

2021

African Development Review

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The Importance of Robust Second-Stage Regressions for Financial Data

Farnè,

Vouldis

2024

Studies in Theoretical and Applied Statistics

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Formal sector enforcement and welfare

Liu-Evans

Mitra

2022

Int Tax Public Finance

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Higher tax enforcement is consistently associated with lower informality in the literature, whereas the evidence is mixed for other factors affecting informality. We review the literature on the effect of tax enforcement on informality and provide further evidence in the form of subsample tests of the effect of tax enforcement identified in Liu-Evans and Mitra (Econ Lett 182:122–125, 2019). We find Rule of Law, the most commonly used proxy for tax enforcement, has a significant and robust negative effect on informality according to the continuous treatment test due to Belloni et al. (Rev Econ Stud 81:608–650, 2014). Using a stylized general equilibrium model for developing economies, with credit constrained formal and informal firms, we conduct numerical simulations to study the enforcement-welfare relationship for varying levels of enforcement costs. We show that tax-enforcement is only desirable as a policy tool for reducing informality when, contrary to evidence for developing economies in the literature, enforcement costs are very low (almost zero).

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Informality and bank stability

Cited by 7 publications

References 42 publications

Do remittances moderate financial development–informality nexus in North Africa?

Do remittances moderate financial development–informality nexus in North Africa?

The Importance of Robust Second-Stage Regressions for Financial Data

Formal sector enforcement and welfare

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