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The Size of Informal Economy and Demand Elasticity Estimates Using Full Price Approach: A Case Study for Turkey

The Size of Informal Economy and Demand Elasticity Estimates Using Full Price Approach: A Case Study for Turkey

Keywords: informal economy, complete demand system, full prices, demand elasticity JEL Classification: E26, D1, D12, J22 Résumé Dans cet article, la taille de l’économie informelle est estimée en utilisant la méthode du prix complet proposée par Gardes F. (2014). Les élasticités de prix sont estimées en intégrant les parties sous-déclarés des revenus des travailleurs indépendants et salariés en utilisant des données transversales couvrant 2003-2006 en Turquie. La contribution de cet article est triple: La taille de l'économie informelle est estimée par l’appariement statistique des enquêtes turques sur le Budget des Familles avec l’enquête sur l’Emploi du Temps en intégrant les prix complets dans le système complet de demande. Deuxièmement, les élasticités des prix et de revenu sont estimées plus justement en élargissant les ressources monétaires avec les parts des revenus provenant des activités informelles, pour une économie émergente comme la Turquie. Troisièmement, cette dernière nous permet de découvrir pour quels groupes de consommation sont les ménages plus susceptibles de s’engager dans le travail informel.
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Estimation of the size of informal economy in Russian Federation based on household budget survey data

Estimation of the size of informal economy in Russian Federation based on household budget survey data

38 The model parameters estimated on a smaller sample of people with positive income from self - employment indicate nearly the same ratios of income underreport and black economy coefficients. This indicates that the underreport patterns are stable to the estimation method proposed, and individuals with different occupation and family status share the different patterns for participation in the informal economy activities. Which is quite logical, although the surprising fact is that blue collar workers do not participate in informal economy when they live together, but start participating when they are single. For the white collar workers, the opposite is true, that single do not participate in the informal economy. Although overall informal economy participation ratio is greater for those who do not live in the couple.
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A new estimation of the size of informal economy using monetary and full expenditures in a complete demand system

A new estimation of the size of informal economy using monetary and full expenditures in a complete demand system

3 Introduction The common thought is that avoiding taxation and insufficiency of revenues are the main reasons of the underground economy 2 . As a vicious circle, undeclared economic activities of producers and households reduce the tax revenues, and an increase in taxes by public authorities to compensate for the loss in taxes, can reinforce the share of unreported incomes. Thus, identifying the nature of black economy and its mechanisms is essential for determining the best strategies for public authority. Therefore, the lack of reliable direct statistics on informal economy needs both the specific methodological solution and the appropriate data bases to obtain indirectly the evaluation of the size unreported incomes. The most frequently used methods are based on macroeconomic approach, giving very often disparate evaluations (cf. Schneider and Enste, ibid.). Nevertheless, very large differences between the obtained results due essentially to the used method prevent policy makers from evaluating the gravity of the problem and the choice of the appropriate policies. This is also the case of Turkey. Many methods used in the past such as money demand method by Ogunc and Yilmaz (2000), the tax collections method by Ilgın (2002), the electricity usage method by Us's (2004), Multiple Indicators Multiple Causes Method (MIMIC) by Schneider and Savaşan (2005) …etc. rises the discussion about the reliability of the estimated size of the informal sector and the used methods (see Ulgen and Ozturk (2006)). These studies give very different estimations of informal economy in Turkey from 3.61% (for Temel et al. (1994)) to 139% (for Akalin and Kesikoglu (2007)) according to the method used for relatively recent periods 3 .
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(size Estimation Of The Informal Economy In Algeria During The Period Of 1990-2017 (using Gutmann’s Simple Currency Ratio Approach

(size Estimation Of The Informal Economy In Algeria During The Period Of 1990-2017 (using Gutmann’s Simple Currency Ratio Approach

Strategy and Development Review Volume: 09 / N°: 16 (2019), p 181-200 4.2 Estimating the size of informal economy using Gutmann’s method: Data Description The monetary approach is based on the assumption that cash is used to make transactions that informal economy actors want to keep hidden from official records. Transactions made using cash are difficult to trace, while those made with other assets, registered in financial institutions, can be easily inspected. In order to estimate the size of informal economy using currency ratio method, annual data series covering the period 1990-2017 were used. The study analyzes the currency ratio to demand deposits in order to estimate the size of economic activity in the informal economy in Algeria. The main sources used to collect the data were obtained from:
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Vietnam labour market and informal economy in a time of crisis and recovery 2007-2009 : main findings of the Labour Force Surveys (LFS)

Vietnam labour market and informal economy in a time of crisis and recovery 2007-2009 : main findings of the Labour Force Surveys (LFS)

In 2007 the General Statistics Office (GSO) launched a joint research program with the French Institute of Research for Development (IRD) to measure and analyse the informal sector in Vietnam. Two kinds of surveys were conducted in 2007: a national labour force survey (LFS) which, in a first for Vietnam classified labour by institutional sector thereby separating out the informal sector; and two specific surveys in Hanoi and Ho Chi Minh City (HCMC) which were grafted onto the LFS2007 to find out more about the characteristics of household businesses (HB) in general and especially the informal sector (HB&IS2007). These surveys have been extensively analyzed and the full results edited in a book (Cling et al., 2010a). Two years later this successful experience has been re-conducted with the additional objectives to consolidate the methodology and to assess the impact of the global crisis on the labour market in general and the informal economy in particular. In late 2009 the LFS was implemented again nationwide, and included the information on the informal sector on behalf of the project, while the HB&IS survey was replicated in the two provinces (Hanoi and HCMC) with two sub-samples: one panel sample of the HBs already surveyed in 2007, and one new sample of HBs drawn from the LFS2009.
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Polish Households' Behavior in the Regular and Informal Economies

Polish Households' Behavior in the Regular and Informal Economies

Conclusion The use of the survey describing on the individual and household levels different types of informal activities (working, buying, hiring) makes possible to explore many new aspects of underground economy mechanisms. The characteristics of participants in informal markets differ when considering various types of underground activities but generally they are related with the constrained employment. Firstly, the rural population appears as the main actor of informal markets, probably because of the income constraints and also, because of the specificity of the labor market less developed in the countryside. Secondly the age and education level do not seem to influence the informal participation, which may show that this participation is more distributed all over the population than in other countries. Thirdly, the average regional unemployment rate is positively related to informal participation, even when the influence of the household regular activity has been already taken into account. It may indicate the existence of a network effect:a larger supply of informal goods and services increasing the household’s exposure to informal activities, thus giving rise to a larger household’s participation. Last, bachelor are more active in the informal economy, while large families seem to be less prone to participate to informal markets than families with only one or two children: this asymmetric relationship may be simply due to the existence of very large families in rural areas, although location have been taken into account in the estimation. It is possible that some supplementary cost to participate to the informal economy appears for large families compared to smaller.
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Corruption and the informal sector in Sub-Saharan Africa

Corruption and the informal sector in Sub-Saharan Africa

Few studies have explored the links between informality and corruption at the firm level. Using a survey of private manufacturing firms in Poland, Romania, and Slovakia, Johnston et al. (2000) find that bureaucratic corruption is significantly associated with hiding output. Among four possible causes of hidden activity (tax, corruption, mafia and benefits of being in the informal sector), only corruption is significantly associated with unofficial activities. More precisely they find that managers saying that firms make extralegal payments for services report that hidden sales are 2.5 percentage points higher, and saying that firms make indirect payments for license is associated with almost 4 percentage points more hidden sales. Most of these empirical researches present a major drawback. They are done on the basis of surveys carried out only on registered firms, and analyses the reason why some of them hide at least some output. Thus they are missing a large part of the informal economy firms that are unregistered and hide all of their output which is certainly of primary importance in the African context.
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Informal employment in Turkey: an overview

Informal employment in Turkey: an overview

INTRODUCTION The Turkish labour market, like that of many developing economies, is characterised by widespread recourse to informal jobs. Several measures have been taken recently by the Turkish authorities to limit the extent of this tenden- cy. The priority of the plan to combat informal employment (KADIM), carried out under the responsibility of the Ministry of Labour and Social Security, was to deal with the informal employment of illegal foreign workers (Tekinarslan, 2007). More recently, a broader programme, aimed at reducing the informal economy, has been launched under the aegis of the Revenue Administration. With a duration of three years (2008-2010), this programme had as its main aim, through the encouragement of organisational and societal consensus re- garding the benefits of greater formalisation, to promote formal activities, to strengthen audit capacity and to make sanctions more dissuasive (Revenue Ad- ministration, 2009). This decision on the part of the government to combat in- formal employment is in keeping with the dynamics of the process of accession to the Union in which Turkey has been engaged since the opening of negotia- tions in October 2005. The examination of Chapter 19 (social policy and em- ployment) by the European Commission in fact points out each year the need for Turkey to fight against informal employment so as to align its labour market on that of the EU countries (Commission of the European Communities, 2005 to 2009). The present study depicts a panorama of informal employment in Tur- key prior to the implementation of these arrangements and accordingly responds to the need expressed by the EU Council to have at its disposal an analysis of undeclared work (OJ L 051, 2008). The study is based mainly on labour force surveys by the Turkish Statistical Institute (TUIK). These surveys make it pos- sible to identify the main characteristics of, and evolutions in, informal em- ployment over a recent period (2000-2006).
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Polish Households' behavior in the Regular and Informal Economies

Polish Households' behavior in the Regular and Informal Economies

Introduction During the transition period, as experienced by Poland after the liberalization of foreign and domestic markets on the 1 st January 1990, the old type of informal market activities gradually disappeared as the official markets got stronger. However, new informal activities were created simultaneously due to the appearance of constraints on households or firms. For instance, subsistence constraints are likely to have appeared for households in 1989 and 1990, which might have obliged households to seek new sources of revenue and to minimize food prices by operating in black markets. The gradual definition of the limits and organization of official markets may also have created new legal constraints for firms, which may then have used unofficial channels to weaken their transaction costs. It is particularly important to analyze the behavior of households in informal markets during this period, as a means of predicting whether the informal economy will disappear soon after first appearing during a transition, or whether it is likely to persist as a permanent structure (see Dupaigne- Hénin, 2001). Three reasons may drive households into the black market: first the search for cheaper commodities in monetary terms. Second, rationing, which is essentially the same as the first cause, commodities being cheaper on the black market when the sum of monetary and the virtual prices arising from constraints and non-monetary resources is taken into account. Third, the participation in one area of the informal economy, for instance by working unofficially, may create social interactions which lowers the cost of other unofficial activities, like buying goods on the black market (see Fortin-Lacroix-Montmarquette, 2000). Therefore, by considering both the participation of a household in informal markets and its official labor supply and consumption, we are able to answer two questions. First, does the participation in various informal market activities which are interdependent give rise to a multiplier effect? This is a question posed by Fortin-Lacroix-Montmarquette (2000) for working and buying activities. Second, is informal consumption driven mainly by a minimizing behavior, whereby households search for lower prices, minimizing the risk of participating in black markets, or rather by the appearance of subsistence constraints due to the transition? In the latter case, informal markets should disappear rapidly as the subsistence constraints faced by households during the transition phase.
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Introduction: Contested Street: Informal Street Vending and its Contradictions

Introduction: Contested Street: Informal Street Vending and its Contradictions

informal” at one end and as “formal” on the other so that the same paradigm based on the concept of “informality” is in play. 8 Understanding the notion of ‘informal economy’ poses challenges. It reflects the tension between normative approaches and the complexity of specific and dynamic socio-eco- political situations. Academics insist on the relevance of locating definitions of the informal economy in specific contexts, notably the specific social norms, the specific relation with state regulation, and the relation to the broader economic environment (Hugon 2014, Lindell 2010, Potts 2008). The case of street trading is interesting in challenging the measurement criteria used when studying an informal economy and norms in public policies and development. For instance, Racaud (2018) and Steiler (2018) in this issue demonstrate that the institutional environment in Kenya and in Tanzania respectively prevents street traders from being licensed and therefore restricts them to the informal economy. Additionally, it is worthy of note that the acquisition of a licence is not a guarantee that the state will not evict vendors from the streets at a future date as illustrated by Spire and Choplin (2018) in the Accra case study.
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Dynamics of Social Networks of Urban Informal Entrepreneurs in an African Economy

Dynamics of Social Networks of Urban Informal Entrepreneurs in an African Economy

4 explore the following issues: the diversity of the modes of regulation of relations (social norms and institutions), power relations in networks and the reproduction of inequalities, the emergence of trust, and the impact of the socio-cultural environment on the nature of personal networks (Lourenço-Lindell, 2002; Lyon, 2000; Cleaver, 2005, Meagher, 2010). Though providing a comprehensive analysis of social relations, this research has shown little interest in the dynamics of social relations in the trajectory of entrepreneurs and their activity. The contribution of the present study is to provide an analysis of the evolution or transformation of social networks of access to resources in the professional trajectory of micro-entrepreneurs in the informal economy of Bobo-Dioulasso (the second largest city in Burkina Faso) by using an original qualitative perspective 3 . From a theoretical standpoint, this research is premised on Granovetter’s notion of structural or reticular embeddedness (Granovetter, 1985) combined with a qualitative or “discursive” approach to social networks (Mische and White, 1998; Knox et al., 2006; White, 2008). While structural embeddedness emphasizes that economic activity is shaped by the social relations in whom actors are embedded, a qualitative approach serves to avoid the risk of temporal and relational reductionism (embeddeness and decoupling). This theoretical framework allows investigating the following questions. How are social networks and relations formed? What role do they perform as “social barriers to entry”, and how do they (co-)evolve in line with economic activity? How are interpersonal relations and collective and/or organized social forms intertwined?
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Informal Sector Versus Informal Contracts in Nairobi, Kenya

Informal Sector Versus Informal Contracts in Nairobi, Kenya

The lack of data on employment makes it difficult to answer essential questions on the labour market evolution: why did the informal sector appear to grow so much in recent years and what is the role of migration in this growth? The fast urban growth observed in the 1960s and 1970s could be explained by the dualism in the urban areas between the formal and informal sectors (for discussions on the definition of the informal sector, concept initiated by the work of Hart, (1973) in Ghana, see Feige, (1990), Dickens & Lang, (1992), Saint-Paul, (1996), Mead & Morrisson, (1996), Portes & Haller (2002)). In this theory urban unemployment is not the only transitional state towards good quality jobs. The urban informal sector also forms—for migrants but also more generally for the poorest—a transitional sector from the traditional sector (agriculture) towards the urban formal sector. In this view, the informal economy is mainly seen as a reservoir for the under-employed who expect (and do not necessarily get) higher revenue by eventually entering into the formal sector. The migrants were supposed to first enter the informal sector to improve their skills, adapt to the city way of life and then enter the formal, protected sector. Migration is therefore pointed out as a key factor in the development of the informal economy. However, the highest growth rates in the informal sector were observed in the 1980s and 1990s when urban growth rates appear to decline. In the case of Kenya, Nairobi’s growth rate was never as high as in the 1960s (12.2% per year in 1962-69) and has since been fairly constant (ranging between 4.8% and 5.0% per year). Did the migrants really form the bulk of the labour force employed in the informal sector? Can the growth of the informal sector essentially be attributed to migration?
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Innovation in the household business and informal sectors

Innovation in the household business and informal sectors

Current innovation is not only fostered by internet usage but also by future activity plan- ning (see Table 8.8). HBs were asked whether they plan to strengthen their manpower or increase their activity level. Generally, innovators are more likely to be involved in strengthening their activities in the future. 13 per cent of the innovators plan to increase their manpower and 42 per cent plan to increase their activity level, and only 4 per cent and 21 per cent (respectively) of the non-innovators plan to do so. The pattern of lower shares among non-innovators appears consistently in both urban and rural areas, in both the formal and the informal sector and across industries. This is because planning helps small business owners to innovate (Beaver and Prince, 2004). Through the plan- ning process, small business owners are more likely to identify issues related to the need for new technology and training in order to help their business grow.
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Analysis of informal communication networks - a case study

Analysis of informal communication networks - a case study

This article also points to potential for research and real world deployment above and beyond these questions: the approach can also be used to identify weaknesses in enterprise networks and as a decision making tool in the process of group reorganisation (see Gloor et al. 2007; Putzke et al. 2008). Organisational charts often fail to reflect the actual group structures within the enterprise, as occurring due to unplanned, informal communications. Using the method presented here, it is easier to ascertain which persons and groups communicate well, and which persons interact less frequently than envisaged. This applies also to business processes. The better they reflect actual information flows within the enterprise, the more effective business processes are. The approach presented here again provides significant insights. At an individual project management level it is also important to recognize which employees are central to a group, who acts as a gatekeeper to link teams and where bottlenecks occur (due to, say, an excessive number of emails). This also facilitates the identification of experts in the enterprise: taking the content of emails into account, bi-modal networks can be generated to link staff with topics and visualise knowledge maps that show who is involved in exchanges on certain topics and with what degree of intensity. These maps also show which employees have knowledge and experience in which disciplines and fields. Knowledge maps are thus a valuable tool for quickly locating specialist knowledge, or composing project teams where a combination of staff with experience from different divisions of the enterprise is required.
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Performance of household businesses and the informal sector

Performance of household businesses and the informal sector

CONClUSION This chapter has highlighted the low level of performance of HBs as a whole. With a median value added of 2.6 million VND per month for informal HBs and 5.5 million VND for formal HBs, the creation of net wealth by HBs is weak, reflecting again a poor use of technology and low labour productivity. Around half of the informal HB owners and one quarter of the formal ones yield a profit that is below the minimum wage. One can roughly estimate that one third of the HBs generate a profit that is below the poverty line, although some of them only partially rely on their HB to make a living. The level of capital is generally very small, and significant investments are rarely made. Two thirds of the HBs do not invest in expanding their business with more capital but instead only maintain or replace equipment when necessary.
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Characteristics of household business and the informal sector

Characteristics of household business and the informal sector

To conclude on premises, the type of premises used for an activity and their occupan- cy status are diverse among HBs. A non-negligible proportion of them, one third of the informal HBs, have no fixed location from which to run their business, reflecting a high level of instability and precariousness. However, this proportion is on the decline. Around half of the HB owners benefit from a high degree of stability as they operate their business out of their home, which they generally own. However, they are res- tricted in their growth prospects as space in their home is limited. Another segment is comprised of people who have a HB and do not own their premises but occupy freely premises owned by family members. Although they do not their premises, as a family member they benefit from a certain assurance regarding their stability. Howe- ver, free occupancy generates moral debt towards their family that can impact the functioning of their business (see Chapter 10). Finally, a minority of HBs, mostly formal ones, pay rent for a professional premises. That is why they can be more vulnerable to economic shocks, but they also have the highest potential for growth as they can adapt the surface of their premises to the size of their activity, and they operate in more adequate conditions.
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Organizing the Field of the Social Economy. The Social Economy and its Classification

Organizing the Field of the Social Economy. The Social Economy and its Classification

volunteers; sometimes even social policies are discussed with the social economy organizations and experimented by them. Therefore there is a trend to measure voluntary work inside mutual societies and non-profit institutions. Volunteer work is no doubt a major part of the “added value” of these organizations, even if in the most professionalized it is reduced to the volunteering of board or other elected members. Volunteers are frequently members of the organization: one member over two fulfils some voluntary tasks, regularly or occasionally in most countries (SILC 2008) But membership is not a prerequisite: people can volunteer just a few times a year for special events through an organization they are not member of or even give time without pay regularly without being a member of the organization they work for.
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Contribution of household businesses and the informal sector to the economy

Contribution of household businesses and the informal sector to the economy

There is a serious decline of productivity per hour in the trade sector and to a lesser ex- tent in the service sector in both cities. Even if the data is not fully comparable, 7 it shows a degradation of the performance and/or the working conditions for at least a compo- nent of the informal sector. As hinted above, there is corroborating evidence that petty traders are in a highly precarious situation. Their situation may be worse in big cities, where their number is too high for the demand. The average productivity of labour in Hanoi and in Ho Chi Minh City in the trade sector in 2014 is below the national average for informal HBs, but it is above the national average in the other sectors (see Table 5.6). In Chapter 2 we saw that the wage workers in the informal sector experienced the slowest growth in wages of all the wage workers in the various institutional sectors. A comparison with the 2007 findings suggests that the situation could be worse for non-wage workers, especially in the trade sector. As the number of persons working alone has declined and the number of HBs that use family labour has increased, a fall in productivity corresponds to what we have just seen above, i.e. the self-employed sharing the profit with family members who are employed but do not increase the value added and profit of the HB.
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Collective and Informal Learning in the ViewpointS Interactive Medium

Collective and Informal Learning in the ViewpointS Interactive Medium

2.4. What Are the Means for Assessing Informal Learning? Rather than actually measuring learning, it is the acquisition of knowledge that is most often evaluated [ 20 ]. In the case of formal learning, i.e., with an explicit objective, various approaches relying on logics, exploit models of the learner, and of his knowledge. In [ 21 ], for instance, the authors use fuzzy weight-based decision making, which defines the knowledge level of students based on their scores in domain concepts and infers the material for learning. Yet, when we come to informal learning, there is no possible differential measure of distance to a “learning objective”, so that the approach to measure acquisition and use of knowledge is usually qualitative and declarative. For example, Coudel et al. [ 22 ] have asked the members of a learning community to distinguish four skill levels: knows; knows how to analyze; knows how to apply; knows how to develop learning. In complement to assessment methods that require individual feedback from the subjects, the medium itself recording the individual interactions can provide useful measures by extracting indicators at various times of the learning process.
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Mathematical and historical dynamics of modern economy : an application to the Korean economy

Mathematical and historical dynamics of modern economy : an application to the Korean economy

Figure 3.1 illustrates the monthly data series of the utilization rate in the Korean Economy between 1990 and 2014. It leads to three observations. 1) The rate of capacity utilization in the Korean economy has been stabilized around the target or normal rate for economic activities in the long term, 2) There have been its sig- nificant wave movements in the midterm, 3) and disturbances in the short-term. Besides, there are two deep valleys during the observation period. Thus, this means the stock management mechanism that may lie in hiding behind the back- ground of the profile is a damped oscillating system within the stability frontier or may be being progressed toward the direction that ensures stability. That is, this system is locally stable in the long term. Second, the mid-term fluctuation can be caused by not stabilizing factors or the target values but destabilizing factors, such as the private financial reaction parameter. Third, there is short-term noise like stochastic exogenous shocks. Nevertheless, the randomness cannot displace deterministic trajectories but only means that it refers to omitted variables or the change in the parameters. 3
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