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Inequality and informality in transition and emerging countries

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  • Roberto Dell'Anno

    (University of Salerno, Italy)

Abstract

Higher inequality reduces capital accumulation and increases the informal economy, which creates additional employment opportunities for low-skilled and deprived people. As a result, informal employment leads to beneficial effects on income distribution by providing sources of income for unemployed and marginalized workers. Despite this positive feedback, informality raises problems for public finances and biases official statistics, reducing the effectiveness of redistributive policies. Policymakers should consider the links between inequality and informality because badly designed informality-reducing policies may increase inequality.

Suggested Citation

  • Roberto Dell'Anno, 2021. "Inequality and informality in transition and emerging countries," IZA World of Labor, Institute of Labor Economics (IZA), pages 325-325, April.
    • Handle: RePEc:iza:izawol:journl:2021:n:325
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    References listed on IDEAS

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    1. Aziz N. Berdiev & James W. Saunoris, 2019. "On the Relationship Between Income Inequality and the Shadow Economy," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 45(2), pages 224-249, April.
    2. Rafael La Porta & Andrei Shleifer, 2014. "Informality and Development," Journal of Economic Perspectives, American Economic Association, vol. 28(3), pages 109-126, Summer.
    3. Schneider, Friedrich, 2005. "Shadow economies around the world: what do we really know?," European Journal of Political Economy, Elsevier, vol. 21(3), pages 598-642, September.
    4. Roberto Dell'Anno & Adalgiso Amendola, 2015. "Social Exclusion and Economic Growth: An Empirical Investigation in European Economies," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 61(2), pages 274-301, June.
    5. Enzo Valentini, 2009. "Underground Economy, Evasion and Inequality," International Economic Journal, Taylor & Francis Journals, vol. 23(2), pages 281-290.
    6. Eilat, Yair & Zinnes, Clifford, 2002. "The Shadow Economy in Transition Countries: Friend or Foe? A Policy Perspective," World Development, Elsevier, vol. 30(7), pages 1233-1254, July.
    7. Dell'Anno, Roberto, 2018. "Inequality, Informality, And Credit Market Imperfections," Macroeconomic Dynamics, Cambridge University Press, vol. 22(5), pages 1184-1206, July.
    8. Andreas Buehn & Friedrich Schneider, 2012. "Shadow economies around the world: novel insights, accepted knowledge, and new estimates," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(1), pages 139-171, February.
    9. Roberto Dell’Anno & Helen Offiong Solomon, 2014. "Informality, Inequality, and ICT in Transition Economies," Eastern European Economics, Taylor & Francis Journals, vol. 52(5), pages 3-31, September.
    10. Schneider,Friedrich & Enste,Dominik H., 2016. "The Shadow Economy," Cambridge Books, Cambridge University Press, number 9781316600894.
    11. Rosser, J. Jr. & Rosser, Marina V. & Ahmed, Ehsan, 2000. "Income Inequality and the Informal Economy in Transition Economies," Journal of Comparative Economics, Elsevier, vol. 28(1), pages 156-171, March.
    12. Dell’Anno, Roberto, 2016. "Analyzing the Determinants of the Shadow Economy With a “Separate Approach”. An Application of the Relationship Between Inequality and the Shadow Economy," World Development, Elsevier, vol. 84(C), pages 342-356.
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    Cited by:

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    2. Masca, Simona-Gabriela & Chis, Diana-Maria, 2023. "Distributional implications of informal economy in the EU countries: Accounting for the spread of tax evasion benefits and cultural characteristics," Socio-Economic Planning Sciences, Elsevier, vol. 87(PB).

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    More about this item

    Keywords

    informality; inequality; shadow economy;
    All these keywords.

    JEL classification:

    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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