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Opening the Pandora's box? Trade openness and informal sector growth

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  • Amit Ghosh
  • Saumik Paul

Abstract

This article constructs a labour transition model combining the features of job loss and job creation in the formal sector of an economy. The theoretical model examines the impact of trade liberalization on net job transition from formal to informal sector. In the light of our model we establish certain pre-conditions based on simulations under which trade liberalization is accompanied by rising informal sector. The model outcome conforms to the empirical evidence of rising informality with openness which we find in 18 Central Eastern European and Former Soviet Union countries.

Suggested Citation

  • Amit Ghosh & Saumik Paul, 2008. "Opening the Pandora's box? Trade openness and informal sector growth," Applied Economics, Taylor & Francis Journals, vol. 40(15), pages 1995-2007.
    • Handle: RePEc:taf:applec:v:40:y:2008:i:15:p:1995-2007
    DOI: 10.1080/00036840600915273
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    References listed on IDEAS

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    1. Richard B. Freeman, 1994. "Working Under Different Rules," NBER Books, National Bureau of Economic Research, Inc, number free94-1, March.
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    Cited by:

    1. Ghosh Dastidar, Sayantan, 2015. "Manufacturing and Trade Liberalisation of India: Continuing the Debate," MPRA Paper 61907, University Library of Munich, Germany.
    2. Simplice Asongu, 2015. "Liberalisation and Financial Sector Competition: A Critical Contribution to the Empirics with an African Assessment," South African Journal of Economics, Economic Society of South Africa, vol. 83(3), pages 425-451, September.
    3. Imamoglu, Hatice, 2021. "The role of financial development on the underground economy in regards to Europe’s 2020 strategy," Economic Systems, Elsevier, vol. 45(2).
    4. Villa, Stefania., 2010. "Exploring the linkages between investment and employment in Moldova : a time-series analysis," ILO Working Papers 994553423402676, International Labour Organization.
    5. Imamoglu, Hatice, 2017. "Estimating the roles of financial sector development and international trade openness in underground economies: Evidence from the European Union," Economics Discussion Papers 2017-50, Kiel Institute for the World Economy (IfW Kiel).
    6. Salinas, Aldo & Ortiz, Cristian & Changoluisa, Javier & Muffatto, Moreno, 2023. "Testing three views about the determinants of informal economy: New evidence at global level and by country groups using the CS-ARDL approach," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 438-455.
    7. repec:ilo:ilowps:455342 is not listed on IDEAS

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