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Skills, Informality, and Development

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  • Arup Mitra
  • Dibyendu Maiti

Abstract

This paper makes an attempt to estimate the index of informal sector employment which can be attributed to the supply-push phenomenon. Factors which explain the inter-state variations include the industrial-informal sector wage gap, revenue expenditure, and development expenditure incurred by the government. Increased development expenditure brings in a decline in distress-led informalization. With improved education, health, and infrastructure facilities the employability of an individual goes up, which, in turn, reduces the compulsion to get absorbed residually. However, expansion in government activities measured through increased revenue expenditure raises in-migration, which in turn raises the supply-push phenomenon. We also observed that with an increase in distress-led informalization inequality tends to rise. Adoption of labour intensive technology in the organized industrial sector is indeed crucial for pro-poor growth. The other policy implication is in terms of enhanced investment in the areas of education, health and other infrastructural facilities.

Suggested Citation

  • Arup Mitra & Dibyendu Maiti, 2016. "Skills, Informality, and Development," Working Papers id:8682, eSocialSciences.
    • Handle: RePEc:ess:wpaper:id:8682
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    References listed on IDEAS

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    1. Mikael Lindahl & Alan B. Krueger, 2001. "Education for Growth: Why and for Whom?," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1101-1136, December.
    2. Koujianou Goldberg, Pinelopi & Pavcnik, Nina, 2003. "The response of the informal sector to trade liberalization," Journal of Development Economics, Elsevier, vol. 72(2), pages 463-496, December.
    3. Marjit, Sugata & Ghosh, Sudeep & Biswas, Amit, 2007. "Informality, corruption and trade reform," European Journal of Political Economy, Elsevier, vol. 23(3), pages 777-789, September.
    4. Marjit, Sugata, 2003. "Economic reform and informal wage--a general equilibrium analysis," Journal of Development Economics, Elsevier, vol. 72(1), pages 371-378, October.
    5. Dilip Mookherjee & Stefan Napel & Debraj Ray, 2010. "Aspirations, Segregation, and Occupational Choice," Journal of the European Economic Association, MIT Press, vol. 8(1), pages 139-168, March.
    6. Dibyendu Maiti & Sugata Marjit, 2008. "Trade liberalization, production organization and informal sector of the developing countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 17(3), pages 453-461.
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    Citations

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    Cited by:

    1. Savita Bhat & N S Siddharthan, 2010. "Human Capital, Labour Productivity and Employment," Working Papers id:3110, eSocialSciences.
    2. Bishwanath Goldar, 2010. "Informalization of Industrial Labour in India: Are labour market rigidities and growing import competition to blame?," Working Papers id:3125, eSocialSciences.
    3. Hansa Jain, 2017. "Contractualization and Wage Differences: Evidence from Organized Manufacturing Industries in India," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 60(3), pages 461-479, September.
    4. Arup Mitra, 2015. "Informal Economy in India: Persistence and Meagreness," Agrarian South: Journal of Political Economy, Centre for Agrarian Research and Education for South, vol. 4(2), pages 216-231, August.

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    More about this item

    Keywords

    informal sector employment; supply-push phenomenon; inter-state variations; industrial-informal sector wage gap; revenue expenditure; development expenditure; informalization; employability; labour intensive technology;
    All these keywords.

    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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