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Seeking Rent In The Informal Sector

Author

Listed:
  • Saibal KAR
  • Biswajit MANDAL
  • Sugata MARJIT
  • Vivekananda MUKHERJEE

Abstract

Rent seeking within the vast informal segment of the developing world is a relatively under‐explored topic in the interface of labor market policies and public economics. Moreover, how rent seeking and corruption within the informal segment gets affected by economic reforms targeted for the formal sector is rarely discussed in the literature. This paper fills the gap. We identify conditions under which economic reform in the formal segment will increase the rate of corruption or rent seeking in the informal sector and raise the pay‐off for those involved in rent‐seeking activities. When the formal sector contracts due to reforms, rent seeking in the informal sector may increase and lower the level of welfare unconditionally. Economic reforms may increase corruption instead of reducing it, unlike standard conjectures.

Suggested Citation

  • Saibal KAR & Biswajit MANDAL & Sugata MARJIT & Vivekananda MUKHERJEE, 2020. "Seeking Rent In The Informal Sector," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 91(1), pages 151-164, March.
    • Handle: RePEc:bla:annpce:v:91:y:2020:i:1:p:151-164
    DOI: 10.1111/apce.12253
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    Cited by:

    1. Saha, Shrabani & Beladi, Hamid & Kar, Saibal, 2021. "Corruption control, shadow economy and income inequality: Evidence from Asia," Economic Systems, Elsevier, vol. 45(2).
    2. Vivekananda Mukherjee and Aparajita Roy, 2019. "Incidence of Corruption On Formal And Informal Sectors: Is There Any Symmetry?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 44(3), pages 79-99, September.
    3. Shrimoyee Ganguly & Rajat Acharyya, 2021. "Trade liberalization, export quality, and three dimensions of wage inequality," Review of Development Economics, Wiley Blackwell, vol. 25(4), pages 2157-2179, November.
    4. Klaus Prettner & Davud Rostam‐Afschar, 2020. "Can taxes raise output and reduce inequality? The case of lobbying," Scottish Journal of Political Economy, Scottish Economic Society, vol. 67(5), pages 455-461, November.

    More about this item

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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