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The Dynamics of the Informal Economy

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  • Roxana Gutierrez-Romero
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    Abstract

    This 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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    File URL: http://www.csae.ox.ac.uk/workingpapers/pdfs/2010-07text.pdf
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    Bibliographic Info

    Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number CSAE WPS/2010-07.

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    Date of creation: 01 Feb 2010
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    Handle: RePEc:oxf:wpaper:csae-wps/2010-07

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    Related research

    Keywords: Informal economy; Occupational choice and inequality;

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    Cited by:
    1. Alicia Puyana & Jose Romero, 2012. "Informalidad y dualismo en la economía mexicana," Serie documentos de trabajo del Centro de Estudios Económicos 2012-11, El Colegio de México, Centro de Estudios Económicos.
    2. Alicia Puyana & José Romero, 2010. "Informalidad y dualismo en la economía mexicana," Serie documentos de trabajo del Centro de Estudios Económicos 2010-04, El Colegio de México, Centro de Estudios Económicos.

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