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Globalisation versus Informality: Evidence from developing countries

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  • PHAM Thi Hong Hanh

Abstract

A number of theoretical studies have tended to trace the nature of globalization process’ impacts (mostly characterised by trade opening) on informality, while relevant empirical literature has been not well developed. The paper aims to fill this knowledge gap by shedding further light on the linkages running from globalisation to informality in developing countries. Moreover, in this study, globalisation is characterised not only by trade integration but also by other globalisation aspects, such as social globalisation, financial globalisation and so forth. To achieve the main objective, we employ the Bayesian statistical techniques, which allow one to determine, from a large set of different globalization indicators, a subset of indicators most likely to influence the size of informality. Our finding reveals that the indicators with consistently high inclusion probabilities are trade integration, trade reforms, de jure financial openness and social globalisation. On the other hand, many covariates found significant in previous empirical studies are not robust to including in informality modelling.

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Bibliographic Info

Paper provided by FIW in its series FIW Working Paper series with number 074.

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Length: 34
Date of creation: Oct 2011
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Handle: RePEc:wsr:wpaper:y:2011:i:074

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Keywords: Globalisation; Informality; Bayesian Model Averaging; Developing countries;

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  1. Marjit, Sugata & Maiti, Dibyendu S., 2005. "Globalization, Reform and the Informal Sector," Working Paper Series RP2005/12, World Institute for Development Economic Research (UNU-WIDER).
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  8. Marco Fugazza & Norbert Fiess, 2010. "Trade Liberalization And Informality: New Stylized Facts," UNCTAD Blue Series Papers 43, United Nations Conference on Trade and Development.
  9. Goldberg, Pinelopi Koujianou & Pavcnik, Nina, 2003. "The Response of the Informal Sector to Trade Liberalization," CEPR Discussion Papers 3874, C.E.P.R. Discussion Papers.
  10. Fernandez, Carmen & Ley, Eduardo & Steel, Mark F. J., 2001. "Benchmark priors for Bayesian model averaging," Journal of Econometrics, Elsevier, vol. 100(2), pages 381-427, February.
  11. Baltagi, Badi H. & Demetriades, Panicos O. & Law, Siong Hook, 2009. "Financial development and openness: Evidence from panel data," Journal of Development Economics, Elsevier, vol. 89(2), pages 285-296, July.
  12. Theo S Eicher & Lindy Helfman & Alex Lenkoski, 2011. "Robust FDI Determinants: Bayesian Model Averaging In The Presence Of Selection Bias," Working Papers UWEC-2011-07-FC, University of Washington, Department of Economics.
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