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Rethinking the informal labour from an evolutionary point of view

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  • Goktuna, Bilge Ozturk
  • Dayangac, Renginar

Abstract

The model presents the dynamics and the equilibrium of an overlapping generation economy when there is informal employment, a pension system and altruistic agents. The model inspires from stylised facts on developing and Euro-Mediteranean countries where family plays a central role in risk insurance. The rational is emphasised by lower costs compared to private and public insurance systems. Given an initial distribution of the informally employed individuals, the model captures the effects of social security decisions and anticipated bequests on the preference of the agents for formal or informal employment. The impact of fiscal policies on the distribution of employment to formal and informal categories is analysed through the political competition. We show that opportunist behaviour would amplify the relative size of the informal employment.

Suggested Citation

  • Goktuna, Bilge Ozturk & Dayangac, Renginar, 2011. "Rethinking the informal labour from an evolutionary point of view," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(5), pages 609-615.
    • Handle: RePEc:eee:soceco:v:40:y:2011:i:5:p:609-615
    DOI: 10.1016/j.socec.2011.04.017
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    References listed on IDEAS

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    1. Maloney, William F., 2004. "Informality Revisited," World Development, Elsevier, vol. 32(7), pages 1159-1178, July.
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    7. Sebastian Galiani & Federico Weinschelbaum, 2012. "Modeling Informality Formally: Households And Firms," Economic Inquiry, Western Economic Association International, vol. 50(3), pages 821-838, July.
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    More about this item

    Keywords

    Evolutionary dynamics; Informal employment; Public social insurance; Bequests; Political competition;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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