Regulation, governance and informality: an empirical analysis of selected countries
The Informal Economy provides employment to more than 60 per cent of the labour population in the developing world despite being a site unfettered by regulations and social norms of fairness governing pay and work conditions. In assessing the factors behind an informal agent’s decision to formalize, it is asserted that rigidity in regulatory mechanism is the primary cause that impedes the process of formalization. However whether flexible regulations can encourage formalization by making gains of formalization more accessible and certain remains a question. In this paper we argue that flexible regulations does not necessarily manifest into the incentives that are essential for formalization. Reducing rigidities in regulation has a significant pay off only in the ambit of good governance. More specifically we hypothesise that degree of intensity of regulation will hardly matter in containing informality; rather what matters is the quality of governance and capability of the institutions to put the regulations into effect. Using secondary data for 46 countries over the period between 1980 and 2008, we empirically investigate into the linkages between governance, regulation and informal employment by developing static and dynamic panel data models and establish that in curbing informality what turns out to be crucial is the interaction between quality of governance and regulation.
|Date of creation:||27 Sep 2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://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.:
- Axel Dreher & Friedrich Schneider, 2006.
"Corruption and the Shadow Economy: An Empirical Analysis,"
CREMA Working Paper Series
2006-01, Center for Research in Economics, Management and the Arts (CREMA).
- Axel Dreher & Friedrich Schneider, 2010. "Corruption and the shadow economy: an empirical analysis," Public Choice, Springer, vol. 144(1), pages 215-238, July.
- Axel Dreher & Friedrich G. Schneider, 2006. "Corruption and the shadow economy: An empirical analysis," Economics working papers 2006-03, Department of Economics, Johannes Kepler University Linz, Austria.
- Axel Dreher & Friedrich Schneider, 2006. "Corruption and the Shadow Economy: An Empirical Analysis," CESifo Working Paper Series 1653, CESifo Group Munich.
- Dreher, Axel & Schneider, Friedrich, 2006. "Corruption and the Shadow Economy: An Empirical Analysis," IZA Discussion Papers 1936, Institute for the Study of Labor (IZA).
- Axel Dreher & Friedrich Schneider, 2006. "Corruption and the Shadow Economy: An Empirical Analysis," KOF Working papers 06-123, KOF Swiss Economic Institute, ETH Zurich.
- Fikret Adaman & Ayse Mumcu, 2010. "Perceptions on Governance Effectiveness and Informality: A Self-fulfilling Equilibrium," Working Papers 2010/05, Bogazici University, Department of Economics.
- R. Hirschowitz, 1989. "The Other Path: The Invisible Revolution in the Third World," South African Journal of Economics, Economic Society of South Africa, vol. 57(4), pages 266-272, December.
- Dibyendu Maiti & Sugata Marjit, 2008. "Trade liberalization, production organization and informal sector of the developing countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 17(3), pages 453-461.
- Friedrich Schneider & Robert Klinglmair, 2004.
"Shadow Economies Around the World: What Do We Know?,"
CREMA Working Paper Series
2004-03, Center for Research in Economics, Management and the Arts (CREMA).
- Friedrich Schneider & Robert Klinglmair, 2004. "Shadow Economies around the World: What Do We Know?," CESifo Working Paper Series 1167, CESifo Group Munich.
- Friedrich Schneider & Robert Klinglmair, 2004. "Shadow economies around the world: what do we know?," Economics working papers 2004-03, Department of Economics, Johannes Kepler University Linz, Austria.
- Schneider, Friedrich & Klinglmair, Robert, 2004. "Shadow Economies around the World: What Do We Know?," IZA Discussion Papers 1043, Institute for the Study of Labor (IZA).
- Marjit, Sugata & Kar, Saibal, 2011. "The Outsiders: Economic Reform and Informal Labour in a Developing Economy," OUP Catalogue, Oxford University Press, number 9780198071495, March.
- S. Boragan Aruoba, 2010. "Informal Sector, Government Policy and Institutions," 2010 Meeting Papers 324, Society for Economic Dynamics.
- 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.
- Ravi Kanbur, 2009.
"Conceptualising Informality: Regulation and Enforcement,"
- Kanbur, Ravi, 2009. "Conceptualising Informality: Regulation and Enforcement," IZA Discussion Papers 4186, Institute for the Study of Labor (IZA).
- Kanbur, Ravi, 2009. "Conceptualizing Informality: Regulation and Enforcement," Working Papers 48926, Cornell University, Department of Applied Economics and Management.
- Marjit, Sugata & Maiti, Dibyendu S., 2005. "Globalization, Reform and the Informal Sector," Working Paper Series RP2005/12, World Institute for Development Economic Research (UNU-WIDER).
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:33775. 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: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.