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Government Effectiveness and Regional Variation in Informal Employment

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Abstract

This paper analyses the role of government effectiveness in the determination of informal employment. A theoretical model is developed, in which local governance and worker skill level are assumed to influence the decision of the worker whether to seek employment in the formal or informal sector. The model is assessed empirically using data from Brazil, where almost half of the urban labour force is employed informally. The empirical analysis supports the predictions of the model and suggests that informal employment is lower in regions with better governance and higher average education.

Suggested Citation

  • Jonasson, Erik, 2010. "Government Effectiveness and Regional Variation in Informal Employment," Working Papers 2010:13, Lund University, Department of Economics, revised 31 Mar 2011.
  • Handle: RePEc:hhs:lunewp:2010_013
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    File URL: http://project.nek.lu.se/publications/workpap/Papers/WP10_13.pdf
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    References listed on IDEAS

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    1. Bosch, Mariano & Goni, Edwin & Maloney, William, 2007. "The determinants of rising informality in Brazil : Evidence from gross worker flows," Policy Research Working Paper Series 4375, The World Bank.
    2. Norman V. Loayza & Luis Servén, 2010. "Business Regulation and Economic Performance," World Bank Publications, The World Bank, number 2554, June.
    3. Amuedo-Dorantes, Catalina, 2004. "Determinants and Poverty Implications of Informal Sector Work in Chile," Economic Development and Cultural Change, University of Chicago Press, vol. 52(2), pages 347-368, January.
    4. Johannes P. Jütting & Jante Parlevliet & Theodora Xenogiani, 2008. "Informal Employment Re-loaded," OECD Development Centre Working Papers 266, OECD Publishing.
    5. Guillermo E. Perry & William F. Maloney & Omar S. Arias & Pablo Fajnzylber & Andrew D. Mason & Jaime Saavedra-Chanduvi, 2007. "Informality : Exit and Exclusion," World Bank Publications, The World Bank, number 6730, June.
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    Cited by:

    1. Mohamed Amara, 2016. "The linkages between formal and informal employment growth in Tunisia: a spatial simultaneous equations approach," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 56(1), pages 203-227, January.
    2. Basu, Arnab K. & Chau, Nancy H. & Siddique, Zahra, 2011. "Tax Evasion, Minimum Wage Non-Compliance and Informality," IZA Discussion Papers 6228, Institute for the Study of Labor (IZA).
    3. Dürdane Şirin Saracoğlu, 2017. "Labour Market Policies and the Informal Sector: A Segmented Labour Markets Analysis," ERC Working Papers 1705, ERC - Economic Research Center, Middle East Technical University, revised May 2017.
    4. Hazans, Mihails, 2011. "Informal Workers across Europe: Evidence from 30 Countries," IZA Discussion Papers 5871, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    informal employment; government effectiveness; Latin America; Brazil;

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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