Firm Heterogeneity, Informal Wage and Good Governance
AbstractWe provide an analysis of enforcement policies in a framework with heterogeneous firms, endogenous determination of informal wage and politically dictated strategies. We argue that firms which operate both in the formal and informal sectors do very little to increase TOTAL employment when faced with the opportunity of hiring workers in the informal labor market. Thus enforcing labor laws and other regulations in this case should not have aggregate employment effects. For firms operating exclusively in the informal sector, the outcome is different. Such features determine the stringency of enforcement in the context of markets characterized by firms with varying levels of productivity. For example if the formal sector has firms with relatively high levels of productivity enforcement has to be stricter than in the case with relatively large number of low productive firms. This seems to be consistent with observed behavior of the authorities in the developed and the developing world. We also talk about the implications of labor market reforms on informal wage.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Review of Development Economics.
Volume (Year): 16 (2012)
Issue (Month): 4 (November)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=1363-6669
Other versions of this item:
- Sugata Marjit & Saibal Kar, . "Firm Heterogeneity, Informal Wage and Good Governance," Discussion Papers 11/23, University of Nottingham, GEP.
- Kar, Saibal & Marjit, Sugata, 2011. "Firm Heterogeneity, Informal Wage and Good Governance," IZA Discussion Papers 5978, Institute for the Study of Labor (IZA).
- Marjit, Sugata, 2009. "Firm Heterogeneity, Informal Wage and Good Governance," MPRA Paper 19168, University Library of Munich, Germany.
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
- K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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