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Informal Economy and Trade in the Agricultural Sector

Author

Listed:
  • Shahroo Malik
  • Harald Oberhofer
  • Jordi Paniagua

Abstract

This paper examines how incorporating the informal economy influences the estimated benefits of international trade liberalization. Using a structural gravity framework, we quantify the impact of Free Trade Agreements (FTAs) while explicitly accounting for the presence of shadow (informal) economic activity among trading partners. Specifically, we assess the expected welfare gains from the recently concluded EU–India FTA under a counterfactual scenario in which the informal agricultural sector is integrated into the formal economy.

Suggested Citation

  • Shahroo Malik & Harald Oberhofer & Jordi Paniagua, 2026. "Informal Economy and Trade in the Agricultural Sector," CESifo Working Paper Series 12509, CESifo.
    • Handle: RePEc:ces:ceswps:_12509
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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