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Globalisation versus Informality: Evidence from developing countries

  • PHAM Thi Hong Hanh

A number of theoretical studies have tended to trace the nature of globalization process’ impacts (mostly characterised by trade opening) on informality, while relevant empirical literature has been not well developed. The paper aims to fill this knowledge gap by shedding further light on the linkages running from globalisation to informality in developing countries. Moreover, in this study, globalisation is characterised not only by trade integration but also by other globalisation aspects, such as social globalisation, financial globalisation and so forth. To achieve the main objective, we employ the Bayesian statistical techniques, which allow one to determine, from a large set of different globalization indicators, a subset of indicators most likely to influence the size of informality. Our finding reveals that the indicators with consistently high inclusion probabilities are trade integration, trade reforms, de jure financial openness and social globalisation. On the other hand, many covariates found significant in previous empirical studies are not robust to including in informality modelling.

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Paper provided by FIW in its series FIW Working Paper series with number 074.

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Length: 34
Date of creation: Oct 2011
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Handle: RePEc:wsr:wpaper:y:2011:i:074
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  1. 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.
  2. Jeffrey Sachs & Andrew Warner, 1995. "Economic Reform and the Progress of Global Integration," Harvard Institute of Economic Research Working Papers 1733, Harvard - Institute of Economic Research.
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  5. Theo S Eicher & Lindy Helfman & Alex Lenkoski, 2011. "Robust FDI Determinants: Bayesian Model Averaging In The Presence Of Selection Bias," Working Papers UWEC-2011-07-FC, University of Washington, Department of Economics.
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  7. Francisco Rodriguez & Dani Rodrik, 1999. "Trade Policy and Economic Growth: A Skeptic's Guide to Cross-National Evidence," NBER Working Papers 7081, National Bureau of Economic Research, Inc.
  8. Badi H. Baltagi & Panicos O. Demetriades & Siong Hook Law, 2008. "Financial Development and Openness: Evidence from Panel Data," Center for Policy Research Working Papers 107, Center for Policy Research, Maxwell School, Syracuse University.
  9. Bruce A. Blonigen & Jeremy Piger, 2011. "Determinants of Foreign Direct Investment," NBER Working Papers 16704, National Bureau of Economic Research, Inc.
  10. Beladi, Hamid & Yabuuchi, Shigemi, 2001. "Tariff-induced capital inflow and welfare in the presence of unemployment and informal sector," Japan and the World Economy, Elsevier, vol. 13(1), pages 51-60, January.
  11. 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).
  12. 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.
  13. Schneider, Friedrich G., 2007. "Shadow Economies and Corruption All Over the World: New Estimates for 145 Countries," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 1, pages 1-66.
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