Revealed Informal Activity
AbstractWhat does it mean to be in the informal sector? Many characterizations have been used in the literature, for example, firms that are unregistered or employ a small workforce or firms/economic enterprises that do not have access to formal capital markets. But many people participate in both formal and informal activities, while classification of partici-pation is often based on primary employment. This creates limitations to the analytical power of existing measures of informality. We develop a method for assigning house-holds to the informal sector by inferring informal sector activity using income and ex-penditure surveys. We apply this method to the case of Bulgaria using LSMS income and expenditure surveys before and after a significant economic reform and compare it to those made using other indicators of informal sector activity. Our work shows that the informal sector acts as a buffer for households during periods of crisis when formal sector employment opportunities are limited. It shows the limitations of alternative styl-ized measures of informality in assessing the vulnerability of households involved in the informal sector, especially during periods of extreme economic hardship.
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Bibliographic InfoPaper provided by Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies) in its series Working Papers with number 296.
Date of creation: Feb 2011
Date of revision:
Other versions of this item:
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
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- Dimova, Ralitza & Gang, Ira N. & Landon-Lane, John, 2005. "The Informal Sector During Crisis and Transition," Working Paper Series RP2005/18, World Institute for Development Economic Research (UNU-WIDER).
- Grimm, Michael & Gunther, Isabel, 2005. "Inter- and Intra-household Linkages Between the Informal and Formal Sector: A Case Study for Urban Burkina Faso," Working Paper Series RP2005/14, World Institute for Development Economic Research (UNU-WIDER).
- Ira N. Gang & Ralitza Dimova, 2004.
"Self-Selection And Earnings During Volatile Transition,"
Departmental Working Papers
200409, Rutgers University, Department of Economics.
- Dimova, Ralitza & Gang, Ira N., 2004. "Self-Selection and Earnings During Volatile Transition," IZA Discussion Papers 1158, Institute for the Study of Labor (IZA).
- Ralitza Dimova & Ira N. Gang, 2004. "Self-Selection And Earnings During Volatile Transition," William Davidson Institute Working Papers Series 2004-699, William Davidson Institute at the University of Michigan.
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