The dynamics of parallel economies. Measuring the informal sector in Mexico
AbstractThe existence of parallel economies that operate in the shadows of informality within most Latin American countries is widely recognized by the economic literature. However, its composition, size and effects on economic growth are still open questions. In this paper, we estimate the size and the evolution of the Mexican informal economy in the last three decades using a vector error correction model. In addition to the standard explanatory variables traditionally used in the currency demand approach, we include remittances given their relevance in the Mexican economic system. The results indicate that informality prior to the late 1980s accounted for at least two thirds of GDP, while stabilizing around one third of GDP in the last decade. Furthermore, our estimates provide evidence of a positive long-run relationship between informality and economic growth.
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Bibliographic InfoArticle provided by Elsevier in its journal Research in Economics.
Volume (Year): 63 (2009)
Issue (Month): 3 (September)
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Web page: http://www.elsevier.com/locate/inca/622941
Informal sector Currency demand VEC Remittances;
Other versions of this item:
- José Brambila Macias & Guido Cazzavillan, 2008. "The Dynamics of Parallel Economies. Measuring the Informal Sector in México," Working Papers 2008_42, Department of Economics, University of Venice "Ca' Foscari".
- Brambila Macias, Jose, 2008. "The Dynamics of Parallel Economies. Measuring the Informal Sector in México," MPRA Paper 8400, University Library of Munich, Germany.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
- F24 - International Economics - - International Factor Movements and International Business - - - Remittances
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
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