Firm Heterogeneity, Informal Wage and Good Governance
We provide an analysis of enforcement policies in a framework with heterogeneous firms, endogenous determination of informal wage and politically dictated strategies. We argue that firms which operate both in the formal and informal sectors do very little to increase TOTAL employment when faced with the opportunity of hiring workers in the informal labor market. Thus enforcing labor laws and other regulations in this case should not have aggregate employment effects. For firms operating exclusively in the informal sector, the outcome is different. Such features determine the stringency of enforcement in the context of markets characterized by firms with varying levels of productivity. For example if the formal sector has firms with relatively high levels of productivity enforcement has to be stricter than in the case with relatively large number of low productive firms. This seems to be consistent with observed behavior of the authorities in the developed and the developing world. We also talk about the implications of labor market reforms on informal wage.
|Date of creation:||Nov 2009|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Pinelopi K. Goldberg & Nina Pavcnik, 2003.
"The Response of the Informal Sector to Trade Liberalization,"
NBER Working Papers
9443, National Bureau of Economic Research, Inc.
- Koujianou Goldberg, Pinelopi & Pavcnik, Nina, 2003. "The response of the informal sector to trade liberalization," Journal of Development Economics, Elsevier, vol. 72(2), pages 463-496, December.
- Goldberg, Pinelopi Koujianou & Pavcnik, Nina, 2003. "The Response of the Informal Sector to Trade Liberalization," CEPR Discussion Papers 3874, C.E.P.R. Discussion Papers.
- Marjit, Sugata, 2003. "Economic reform and informal wage--a general equilibrium analysis," Journal of Development Economics, Elsevier, vol. 72(1), pages 371-378, October.
- Kanbur, Ravi, 2009.
"Conceptualizing Informality: Regulation and Enforcement,"
48926, Cornell University, Department of Applied Economics and Management.
- Ravi Kanbur, 2009. "Conceptualising Informality: Regulation and Enforcement," Working Papers id:2005, eSocialSciences.
- Kanbur, Ravi, 2009. "Conceptualising Informality: Regulation and Enforcement," IZA Discussion Papers 4186, Institute for the Study of Labor (IZA).
- Marc J. Melitz, 2003.
"The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity,"
Econometric Society, vol. 71(6), pages 1695-1725, November.
- Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
- Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
- Saul Estrin & Tomasz Mickiewicz, 2012.
"Shadow Economy and Entrepreneurial Entry,"
Review of Development Economics,
Wiley Blackwell, vol. 16(4), pages 559-578, November.
- Sugata Marjit & Saibal Kar & Hamid Beladi, 2007. "Trade Reform and Informal Wages," Review of Development Economics, Wiley Blackwell, vol. 11(2), pages 313-320, 05.
- Sugata Marjit & Amit K. Biswas, 2011.
"Informality, Corruption and Trade Reform,"
Trade Working Papers
22896, East Asian Bureau of Economic Research.
- Chaudhuri, Sarbajit & Mukhopadhyay, Ujjaini, 2009. "Revisiting the Informal Sector: A General Equilibrium Approach," MPRA Paper 52135, University Library of Munich, Germany.
- Esfahani, Hadi Salehi & Mookherjee, Dilip, 1995. "Productivity, contracting modes, and development," Journal of Development Economics, Elsevier, vol. 46(2), pages 203-231, April.
- Sugata Marjit & Vivekananda Mukherjee & Martin Kolmar, 2006. "Poverty, taxation and governance," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(3), pages 325-333.
- Marcouiller, Douglas & Young, Leslie, 1995. "The Black Hole of Graft: The Predatory State and the Informal Economy," American Economic Review, American Economic Association, vol. 85(3), pages 630-46, June.
- Rauch, James E., 1991. "Modelling the informal sector formally," Journal of Development Economics, Elsevier, vol. 35(1), pages 33-47, January.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:19168. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.