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Informality and poverty: Are these processes dynamically interrelated? Evidence from Argentina

Author

Listed:
  • Francesco Devicienti

    (University of Torino and LABORatorio Revelli, Collegio Carlo Alberto)

  • Fernando Groisman

    (CONICET and University of Buenos Aires)

  • Ambra Poggi

    () (University of Milan Bicocca and LABORatorio Revelli, Collegio Carlo Alberto)

Abstract

Poverty and informal employment are often regarded as correlated phenomena. Many empirical studies have shown that informal employment has a causal impact on household poverty, mainly through low wages. Yet other studies focus on the reverse causality from poverty to informality, arising from a range of constraints that poverty poses to job holders. Only recently have empirical researchers tried to study the simultaneous two-way relationship between poverty and informality. However, existing studies have relied upon cross sectional data and static econometric models. This paper takes the next step and studies the dynamics of poverty and informality using longitudinal data. Our empirical analysis is based on a bivariate dynamic random effect probit model and recent panel data from Argentina. The results show that both poverty and informal employment are highly persistent processes at the individual level. Moreover, positive spillover effects are found from past poverty on current informal employment and from past informality to current poverty status, corroborating the view that the two processes are also shaped by interrelated dynamics.

Suggested Citation

  • Francesco Devicienti & Fernando Groisman & Ambra Poggi, 2009. "Informality and poverty: Are these processes dynamically interrelated? Evidence from Argentina," Working Papers 146, ECINEQ, Society for the Study of Economic Inequality.
  • Handle: RePEc:inq:inqwps:ecineq2009-146
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    File URL: http://www.ecineq.org/milano/WP/ECINEQ2009-146.pdf
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    References listed on IDEAS

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    1. Jenkins, Stephen P, 1995. "Easy Estimation Methods for Discrete-Time Duration Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(1), pages 129-138, February.
    2. Arnstein Aassve & Simon Burgess & Matt Dickson & Carol Propper, 2005. "Modelling Poverty by not Modelling Poverty: An Application of a Simultaneous Hazards Approach to the UK," The Centre for Market and Public Organisation 05/134, Department of Economics, University of Bristol, UK.
    3. Gasparini Leonardo & Leonardo Tornaroli, 2009. "Labor Informality in Latin America and the Caribbean: Patterns and Trends from Household Survey Microdata," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE, September.
    4. Fields, Gary S., 1975. "Rural-urban migration, urban unemployment and underemployment, and job-search activity in LDCs," Journal of Development Economics, Elsevier, pages 165-187.
    5. Hansen, Jörgen & Wahlberg, Roger, 2004. "Poverty Persistence in Sweden," IZA Discussion Papers 1209, Institute for the Study of Labor (IZA).
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. repec:unu:wpaper:wp2012-14 is not listed on IDEAS
    2. Keifman, Saúl & Maurizio, Roxana, 2012. "Changes in Labour Market Conditions and Policies: Their Impact on Wage Inequality During the Last Decade," WIDER Working Paper Series 014, World Institute for Development Economic Research (UNU-WIDER).
    3. Guner, Duygu & Uysal, Gokce, 2014. "Culture, Religiosity and Female Labor Supply," IZA Discussion Papers 8132, Institute for the Study of Labor (IZA).
    4. Maurizio, Roxana., 2014. "Labour formalization and declining inequality in Argentina and Brazil in the 2000s a dynamic approach," ILO Working Papers 994855153402676, International Labour Organization.
    5. Hanan Nazier & Racha Ramadan, 2015. "Informality and Poverty: A Causality Dilemma with Application to Egypt," Advances in Management and Applied Economics, SCIENPRESS Ltd, pages 1-4.
    6. repec:ilo:ilowps:485515 is not listed on IDEAS
    7. Carla Canelas, 2015. "Poverty and informality in Ecuador," WIDER Working Paper Series 112, World Institute for Development Economic Research (UNU-WIDER).
    8. Ramoni-Perazzi, Josefa & Orlandoni, Giampaolo, 2015. "Assessing the loss due to working in the informal sector in Venezuela," REVISTA LECTURAS DE ECONOMÍA, UNIVERSIDAD DE ANTIOQUIA - CIE, issue 84, pages 33-58, August.

    More about this item

    Keywords

    poverty; informality; state dependence; dynamic bivariate probit model with random effects.;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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