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Rethinking the informal labour from an evolutionary point of view

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  • Goktuna, Bilge Ozturk
  • Dayangac, Renginar

Abstract

The model presents the dynamics and the equilibrium of an overlapping generation economy when there is informal employment, a pension system and altruistic agents. The model inspires from stylised facts on developing and Euro-Mediteranean countries where family plays a central role in risk insurance. The rational is emphasised by lower costs compared to private and public insurance systems. Given an initial distribution of the informally employed individuals, the model captures the effects of social security decisions and anticipated bequests on the preference of the agents for formal or informal employment. The impact of fiscal policies on the distribution of employment to formal and informal categories is analysed through the political competition. We show that opportunist behaviour would amplify the relative size of the informal employment.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics).

Volume (Year): 40 (2011)
Issue (Month): 5 ()
Pages: 609-615

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Handle: RePEc:eee:soceco:v:40:y:2011:i:5:p:609-615

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Web page: http://www.elsevier.com/locate/inca/620175

Related research

Keywords: Evolutionary dynamics; Informal employment; Public social insurance; Bequests; Political competition;

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  1. Ellen McGrattan & Richard Rogerson & Randall Wright, 1995. "An equilibrium model of the business cycle with household production and fiscal policy," Staff Report, Federal Reserve Bank of Minneapolis 191, Federal Reserve Bank of Minneapolis.
  2. Packard, Truman G., 2007. "Do workers in Chile choose informal employment? A dynamic analysis of sector choice," Policy Research Working Paper Series 4232, The World Bank.
  3. Maloney, William F, 1999. "Does Informality Imply Segmentation in Urban Labor Markets? Evidence from Sectoral Transitions in Mexico," World Bank Economic Review, World Bank Group, World Bank Group, vol. 13(2), pages 275-302, May.
  4. Karras, Georgios, 1994. "Government Spending and Private Consumption: Some International Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 26(1), pages 9-22, February.
  5. Laurence J. Kotlikoff & Avia Spivak, 1979. "The Family as an Incomplete Annuities Market," NBER Working Papers 0362, National Bureau of Economic Research, Inc.
  6. Sebastian Galiani & Federico Weinschelbaum, 2007. "Modeling Informality Formally: Households and Firms," CEDLAS, Working Papers, CEDLAS, Universidad Nacional de La Plata 0047, CEDLAS, Universidad Nacional de La Plata.
  7. Maloney, William F., 2004. "Informality Revisited," World Development, Elsevier, vol. 32(7), pages 1159-1178, July.
  8. Tokman, Victor E., 1989. "Policies for a heterogeneous informal sector in Latin America," World Development, Elsevier, vol. 17(7), pages 1067-1076, July.
  9. Johannes P. Jütting & Jante Parlevliet & Theodora Xenogiani, 2008. "Informal Employment Re-loaded," OECD Development Centre Working Papers 266, OECD Publishing.
  10. Juan Ramón de Laiglesia, 2008. "Living with Duality: Fiscal Policy and Informality in Latin America," OECD Development Centre Policy Insights, OECD Publishing 81, OECD Publishing.
  11. Matthew Jowett, 2003. "Do informal risk sharing networks crowd out public voluntary health insurance? Evidence from Vietnam," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 35(10), pages 1153-1161.
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