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The Effect of Informal Employment and Corruption on Income Levels in Brazil

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  • Jamie Bologna

    (West Virginia University, College of Business and Economics)

Abstract

This paper exploits a unique dataset on corruption and informal sector employment in 476 Brazilian municipalities to estimate whether corruption impacts GDP or income levels once variation in informal economic activity is taken into account. Overall, I find that higher levels of corruption and a larger informal economy are generally associated with poor economic outcomes. However, only the size of the informal economy has a statistically significant effect. This effect is robust to the inclusion of a variety of controls and fixed effects, as well as an instrumental variable analysis. Further, these effects are large in magnitude. For example, a one standard deviation increase in the share of total employees that are informally employed explains a decrease in GDP per-capita of about 18 percent.

Suggested Citation

  • Jamie Bologna, 2014. "The Effect of Informal Employment and Corruption on Income Levels in Brazil," Working Papers 14-26, Department of Economics, West Virginia University.
  • Handle: RePEc:wvu:wpaper:14-26
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    File URL: http://busecon.wvu.edu/phd_economics/pdf/14-26.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Jamie Bologna & Amanda Ross, 2015. "Corruption and entrepreneurship: evidence from Brazilian municipalities," Public Choice, Springer, vol. 165(1), pages 59-77, October.
    2. Joshua Hall & John Levendis, 2017. "The Efficient Corruption Hypothesis and the Dynamics between Economic Freedom, Corruption, and National Income," Working Papers 17-06, Department of Economics, West Virginia University.
    3. Jamie Bologna & Amanda Ross, 2015. "Corruption and Entrepreneurship: Evidence from a Random Audit Program," Working Papers 15-05, Department of Economics, West Virginia University.
    4. Jamie Bologna, 2017. "Contagious corruption, informal employment, and income: evidence from Brazilian municipalities," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 58(1), pages 67-118, January.

    More about this item

    Keywords

    corruption; informal economy; income levels; growth;

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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