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Informal Employment Relationships and Labor Market Segmentation in Transition Economies: Evidence from Ukraine

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Author Info
Hartmut Lehmann
Norberto Pignatti
Abstract

Research on informal employment in transition countries has been very limited because of alack of appropriate data. A new rich panel data set from Ukraine, the Ukrainian LongitudinalMonitoring Survey (ULMS), enables us to provide some empirical evidence on informalemployment in Ukraine and the validity of the three schools of thought in the literature onthe role of informality in the development process. Apart from providing additional evidencewith richer data than usually available in developing countries, the paper investigates to whatextent the informal sector plays a role in labor market adjustment in a transition economy.The evidence points to some labor market segmentation since the majority of informalsalaried employees are involuntarily employed and workers seem to queue for formalsalaried jobs. We also show that the dependent informal sector is segmented into a voluntary"upper tier" and an involuntary lower part where the majority of informal jobs are located.Our contention that informal self-employment is voluntary is confirmed by the substantialearnings premia associated with movements into this state.

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Paper provided by DIW Berlin, German Institute for Economic Research in its series ESCIRRU Working Papers with number 3.

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Length: 62 p.
Date of creation: 2008
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Handle: RePEc:diw:diwesc:diwesc3

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Related research
Keywords: Labor market segmentation; transition economies; Ukraine;

Find related papers by JEL classification:
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
P23 - Economic Systems - - Socialist Systems and Transition Economies - - - Factor and Product Markets; Industry Studies; Population

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References listed on IDEAS
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.:
  1. Fields, Gary S., 2007. "Labor market policy in developing countries : a selective review of the literature and needs for the future," Policy Research Working Paper Series 4362, The World Bank. [Downloadable!]
  2. Lee, Lung-Fei, 1983. "Generalized Econometric Models with Selectivity," Econometrica, Econometric Society, vol. 51(2), pages 507-12, March. [Downloadable!] (restricted)
  3. Eliane Badaoui & Eric Strobl & Frank Walsh, 2007. "Is There An Informal Employment Wage Penalty? Evidence from South Africa," IZA Discussion Papers 3151, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  4. Maloney, William F, 1999. "Does Informality Imply Segmentation in Urban Labor Markets? Evidence from Sectoral Transitions in Mexico," World Bank Economic Review, Oxford University Press, vol. 13(2), pages 275-302, May.
  5. Jarque, Carlos M. & Bera, Anil K., 1980. "Efficient tests for normality, homoscedasticity and serial independence of regression residuals," Economics Letters, Elsevier, vol. 6(3), pages 255-259. [Downloadable!] (restricted)
  6. Bosch, Mariano & Maloney, William, 2005. "Labor market dynamics in developing countries: comparative analysis using continuous time Markov processes," Policy Research Working Paper Series 3583, The World Bank. [Downloadable!]
  7. Tito Boeri & Katherine Terrell, 2002. "Institutional Determinants of Labor Reallocation in Transition," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 51-76, Winter. [Downloadable!] (restricted)
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  8. Chandra, Vandana & Khan, M Ali, 1993. "Foreign Investment in the Presence of an Informal Sector," Economica, London School of Economics and Political Science, vol. 60(237), pages 79-103, February. [Downloadable!] (restricted)
  9. Schneider, Friedrich, 2004. "The Size of the Shadow Economies of 145 Countries all over the World: First Results over the Period 1999 to 2003," IZA Discussion Papers 1431, Institute for the Study of Labor (IZA). [Downloadable!]
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