The Dynamics of the Informal Economy
AbstractThis paper analyses the factors that give rise to the existence of the informal economy and how it evolves over time.� Using an occupational-choice model the paper shows that at early stages of development, informal and formal markets coexist, but in the long-run the size of the informal economy can decline depending on the initial distribution of wealth.� The model shows that the higher the initial wealth inequality the larger the size of the informal economy and the higher the wealth inequality will be in the long-run.� The paper calibrates the model using numerical simulations.
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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number CSAE WPS/2010-07.
Date of creation: 01 Feb 2010
Date of revision:
Informal economy; Occupational choice and inequality;
Find related papers by JEL classification:
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
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- Alicia Puyana & José Romero, 2010. "Informalidad y dualismo en la economía mexicana," Serie documentos de trabajo del Centro de Estudios EconÃ³micos 2010-04, El Colegio de México, Centro de Estudios Económicos.
- Alicia Puyana & Jose Romero, 2012. "Informalidad y dualismo en la economía mexicana," Serie documentos de trabajo del Centro de Estudios EconÃ³micos 2012-11, El Colegio de México, Centro de Estudios Económicos.
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