Strict duality and overlapping productivity distributions between formal and informal firms

Allen, Jeffrey C.; Nataraj, Shanthi; Schipper, Tyler C.

doi:10.1016/j.jdeveco.2018.08.011

Cited by 23 publications

(14 citation statements)

References 19 publications

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“…More interestingly, not only do formality and informality coexist within the same industries producing similar products, but there is a substantial overlap in formal and informal firms' productivity distributions, even within industries (Meghir et al 2015, Allen et al 2018, Ulyssea 2018). Thus, one can find firms with the same level of productivity in either the formal or informal sectors, which is also inconsistent with the dual view of informality.…”

Section: Firmsmentioning

confidence: 99%

Informality: Causes and Consequences for Development

2020

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This article reviews the economic literature on informality, its causes, and its consequences for development. It covers a comprehensive body of research that ranges from well-identified experimental studies to equilibrium macro models, and which more recently includes structural models that integrate both micro and macro effects. The results available in the literature indicate that lowering the costs of formality is not an effective policy to reduce informality but may generate positive aggregate effects, such as higher output and total factor productivity (TFP). The most effective formalization policy is to increase enforcement on the extensive margin but not on the intensive margin of informality. The former generates substantial gains in aggregate TFP and output, without necessarily increasing unemployment. However, the overall welfare impacts are likely to depend on the transitional dynamics between steady states, which remains an open area for future research. Expected final online publication date for the Annual Review of Economics, Volume 12 is August 3, 2020. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.

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Section: Firmsmentioning

confidence: 99%

Informality: Causes and Consequences for Development

2020

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“…According to these results, Amaral and Quintin (2006, p.1552) conclude that the “ dualistic view of labor markets in developing countries should be questioned .” Similarly, Allen et al. (2018) propose a multi‐industry general equilibrium model where formal and informal firms often operate in the same markets, and the degree to which informal firms are similar to formal firms in terms of productivity is heterogeneous across industries. In this framework, informality tends to decrease with industry productivity and establishment size.…”

Section: Theories Of Informalitymentioning

confidence: 99%

Theories and definitions of the informal economy: A survey

Dell’Anno

2021

Journal of Economic Surveys

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This paper surveys the literature on the definitions and theories of the informal economy (IE). It outlines the main differences in the definitional approaches of informality and proposes a definition for the IE that may be consistent with measurement and policy. The literature review distinguishes three, not mutually exclusive, approaches to the IE: the "neoclassical," the "macroeconometric," and the "conceptual" perspectives. I conclude the survey by outlining a framework that points out the main differences and similarities among the schools of thought on the nature of the IE. From a normative perspective, a leading recommendation emerges: a "one-size-fits-all" policy response is inadequate to deal with the heterogeneous nature of the IE. Policy measures should be tailored around the distinct segments of the IE grounded in terms of characteristics, contexts, and needs of the informal units.

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“…The preceding is consistent with ECLAC's structuralist perspective. It considers informality as a social phenomenon resulting from the structural heterogeneity of less developed economies, where high productivity sectors coexist with low productivity sectors, giving rise to the occupational structure of these countries (Allen et al, 2018). Therefore, structuralist analysis sees labor informality as a scarce development of the economic sector that prevents workforce from being fully covered, forcing the surplus population, whether skilled or unskilled labor, to work illegally, earn low wages, or, worse, lose their jobs.…”

Section: Literature Reviewmentioning

confidence: 99%

Informal Economy and Income Distribution in Ecuador During the COVID-19 Pandemic

Peñaloza

Rincón²

2022

Rev. fac. cien. econ.

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This paper seeks to analyze the evolution of labor informality in Ecuador during the coronavirus. The analysis uses microdata from household surveys for 2019 and 2020 to contrast the evolution of informality rate and income. A wage decomposition model is used to estimate the variation in income between the two periods. The results show an annual drop of 11 % in the informal population working a year ago; however, the informality rate rose by 2 %. This behavior is contextualized by a 20 % decrease in the hours worked per week and a 29 % in hourly labor income.

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Strict duality and overlapping productivity distributions between formal and informal firms

Cited by 23 publications

References 19 publications

Informality: Causes and Consequences for Development

Informality: Causes and Consequences for Development

Theories and definitions of the informal economy: A survey

Informal Economy and Income Distribution in Ecuador During the COVID-19 Pandemic

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