On The Size And The Evolution Of The Informal Sector In Developing Countries: The Case Of Turkey
AbstractThis paper studies a three-sector growth model with households differentiated in their factor endowments, resulting in asset and income inequality among the households. Production occurs in agricultural, formal, and informal sectors. In particular, household preferences display Engel effects in two of the goods: agricultural and informally produced goods. Income elasticity of demand for formally produced goods, on the other hand, is equal to one. The model is calibrated to Turkish National data for 1997, and the simulation results indicate that as the economy transitions into the long-run equilibrium with the process of capital accumulation, the importance of agricultural and informal sectors diminish, and that of the formal sector increases, given any degree of inequality. However, with higher degrees of asset inequality, the results show that in the long-run, the economy ends up with a larger informal sector output and a smaller formal sector output. Furthermore, it is shown that lowering the labor taxes in the formal sector yields favorable results in terms of capital stock, income, and formal sector output in both transition and the long-run.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2003 Annual meeting, July 27-30, Montreal, Canada with number 22211.
Date of creation: 2003
Date of revision:
Contact details of provider:
Postal: 555 East Wells Street, Suite 1100, Milwaukee, Wisconsin 53202
Phone: (414) 918-3190
Fax: (414) 276-3349
Web page: http://www.aaea.org
More information through EDIRC
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.:
- Kelley, Bruce, 1994. "The informal sector and the macroeconomy: A computable general equilibrium approach for Peru," World Development, Elsevier, vol. 22(9), pages 1393-1411, September.
- Persson, T. & Tabellini, G., 1993.
"Is Inequality Harmful for Growth,"
537, Stockholm - International Economic Studies.
- Friedrich Schneider & Dominik Enste, 1999. "Shadow Economies Around the World - Size, Causes, and Consequences," CESifo Working Paper Series 196, CESifo Group Munich.
- Loayza, Norman V., 1996.
"The economics of the informal sector: a simple model and some empirical evidence from Latin America,"
Carnegie-Rochester Conference Series on Public Policy,
Elsevier, vol. 45(1), pages 129-162, December.
- Loayza, Norman A., 1997. "The economics of the informal sector : a simple model and some empirical evidence from Latin America," Policy Research Working Paper Series 1727, The World Bank.
- Philip R. Lane & Aaron Tornell, 1997.
"Voracity and Growth,"
Harvard Institute of Economic Research Working Papers
1807, Harvard - Institute of Economic Research.
- W. J. Henisz, 2000. "The Institutional Environment for Economic Growth," Economics and Politics, Wiley Blackwell, vol. 12(1), pages 1-31, 03.
- Edgar L. Feige, 2003.
"Defining And Estimating Underground And Informal Economies: The New Institional Economics Approach,"
Development and Comp Systems
- Feige, Edgar L., 1990. "Defining and estimating underground and informal economies: The new institutional economics approach," World Development, Elsevier, vol. 18(7), pages 989-1002, July.
- Keefer, Philip & Knack, Stephen, 1997. "Why Don't Poor Countries Catch Up? A Cross-National Test of Institutional Explanation," Economic Inquiry, Western Economic Association International, vol. 35(3), pages 590-602, July.
- Easterly, W & Levine, R, 1996.
"Africa's Growth Tragedy : Policies and Ethnic Divisions,"
536, Harvard - Institute for International Development.
- Easterly, William & Levine, Ross, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1203-50, November.
- Grigorian, David A. & Martinez, Albert, 2000. "Industrial growth and the quality of institutions : what do (transition) economies have to gain from the Rule of Law?," Policy Research Working Paper Series 2475, The World Bank.
- Gangopadhyay, Shubhashis, 1998. "Persistence of Dualism in a Closed Economy," Review of Development Economics, Wiley Blackwell, vol. 2(1), pages 11-30, February.
- Friedrich Schneider & Dominik Enste, 2000. "Shadow Economies Around the World," IMF Working Papers 00/26, International Monetary Fund.
- Ira N. Gang & Shubhashis Gangopadhyay, 1990. "A Model of the Informal Sector in Development," Journal of Economic Studies, Emerald Group Publishing, vol. 17(5), pages 19-31, December.
- Stephen L. Parente & Edward C. Prescott, 1997.
"Monopoly rights: a barrier to riches,"
236, Federal Reserve Bank of Minneapolis.
- James Tybout, 1998.
"Manufacturing Firms In Developing Countries: How Well Do They Do, And Why?,"
Development and Comp Systems
- James R. Tybout, 2000. "Manufacturing Firms in Developing Countries: How Well Do They Do, and Why?," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 11-44, March.
- Tybout, James, 1998. "Manufacuring firms in developing countries - how well do they do, and why?," Policy Research Working Paper Series 1965, The World Bank.
- James Tybout, 1999. "Manufacturing Firms in Developing Countries: How Well Do They Do, and Why?," Development and Comp Systems 9906001, EconWPA, revised 10 Jun 1999.
- Rosser, J. Jr. & Rosser, Marina V. & Ahmed, Ehsan, 2000. "Income Inequality and the Informal Economy in Transition Economies," Journal of Comparative Economics, Elsevier, vol. 28(1), pages 156-171, March.
- Colombatto, Enrico, 1998. "An Institutional View of LDC Failure," Journal of Policy Modeling, Elsevier, vol. 20(5), pages 631-648, October.
- Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).
If references are entirely missing, you can add them using this form.