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Article
Publication date: 11 September 2017

Colin C. Williams, Ioana Alexandra Horodnic and Jan Windebank

To transcend the current debates about whether participation in the informal sector is a result of informal workers “exclusion” or their voluntary “exit” from the formal…

Abstract

Purpose

To transcend the current debates about whether participation in the informal sector is a result of informal workers “exclusion” or their voluntary “exit” from the formal sector, the purpose of this paper is to propose and evaluate the existence of a dual informal labour market composed of an exit-driven “upper tier” and exclusion-driven “lower-tier” of informal workers.

Design/methodology/approach

To do this, data from a 2013 Eurobarometer survey involving 27,563 face-to-face interviews across the European Union is reported.

Findings

The finding is that in the European Union, there is a dual informal labour market with those participating in the informal sector due to their exclusion from the formal sector being half the number of those doing so to voluntarily exit the formal sector. Using a logistic regression analysis, the exclusion-driven “lower tier” is identified as significantly more likely to be populated by the unemployed and those living in East-Central Europe and the exit-driven “upper tier” by those with few financial difficulties and living in Nordic nations.

Research limitations/implications

The results reveal the need not only to transcend either/or debates about whether participants in the informal sector are universally exclusion-or exit-driven, and to adopt a both/and approach that recognises a dual informal labour market composed of an exit-driven upper tier and exclusion-driven lower tier, but also for wider research on the relative sizes of these two tiers in individual countries and other global regions, along with which groups populate these tiers.

Originality/value

This is the first evaluation of the internal dualism of the informal sector in the European Union.

Details

Journal of Economic Studies, vol. 44 no. 4
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 13 May 2019

Michael J. Pisani

Enterprises in developed and developing world environments often begin life in the informal sector operating outside the purview of government oversight. Sectoral firm…

Abstract

Purpose

Enterprises in developed and developing world environments often begin life in the informal sector operating outside the purview of government oversight. Sectoral firm change, however, from the informal to the formal sector is not well studied. The purpose of this paper is to answer the following research question: “What firm-level markers help explain the movement of firms from the informal to the formal sector?”

Design/methodology/approach

Data from 719 urban formal enterprises included in the 2016 El Salvador Enterprise Survey undertaken by the World Bank forms the basis of the empirical analyses. The survey questionnaire comprehensively encompasses business practices and performance and the overall business environment.

Findings

Multivariate results reveal location, firm maturity, problems with land acquisition, a line of credit or active business loan, extortion by street gangs and practices of informal competitors increase the odds of informal firms becoming formal enterprises. Lessening the odds of once informal firms moving to the formal sector include the lack of access to public utilities, visitation by tax officials, formation as a corporation, bank accounts, number of employees and time spent focused upon government regulations.

Originality/value

Contextualized within the national setting of El Salvador, the integration of informal enterprises into the formal economy and related public policy implications of informal firm regularization are discussed.

Propósito

Las empresas de países desarrollados y en desarrollo a menudo comienzan su vida en el sector informal y que opera fuera del ámbito de la supervisión gubernamental. Sin embargo, el cambio de empresas sectoriales, desde el sector informal al formal, no está bien estudiado. Este artículo busca responder la siguiente pregunta de investigación: “¿Qué marcadores de nivel de empresa ayudan a explicar el movimiento de las empresas del sector informal al formal?”

Diseño/metodología/enfoque

Los datos de 719 empresas formales urbanas incluidas en la encuesta de empresas de El Salvador de 2016 realizada por el Banco Mundial constituyen la base de los análisis empíricos. El cuestionario de la encuesta abarca de manera integral las prácticas y el rendimiento empresarial y el entorno empresarial general.

Hallazgos

Los resultados multivariables revelan la ubicación, la madurez de la empresa, los problemas con la adquisición de tierras, una línea de crédito o un préstamo comercial activo, la extorsión por parte de pandillas callejeras y las prácticas de competidores informales aumentan las probabilidades de que las empresas informales se conviertan en empresas formales. Disminuir las probabilidades de que una vez las firmas informales se muden al sector formal incluyen la falta de acceso a los servicios públicos, las visitas de los funcionarios tributarios, la formación como corporación, las cuentas bancarias, el número de empleados y el tiempo dedicado a las regulaciones gubernamentales.

Originalidad/valor

En el contexto nacional de El Salvador, se analiza la integración de empresas informales en la economía formal y se discuten las implicaciones de las políticas públicas relacionadas con la regularización de empresas informales.

Details

Academia Revista Latinoamericana de Administración, vol. 32 no. 1
Type: Research Article
ISSN: 1012-8255

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Article
Publication date: 30 November 2021

Priyaranjan Jha and Rana Hasan

The purpose of this paper is to understand labor market regulations and their consequences for the allocation of resources.

Abstract

Purpose

The purpose of this paper is to understand labor market regulations and their consequences for the allocation of resources.

Design/methodology/approach

This paper constructs a theoretical model to study labor market regulations in developing countries and how it affects the allocation of resources between the less productive informal activities and more productive formal activities. It also provides empirical support for some theoretical results using cross-country data.

Findings

When workers are risk-averse and the market for insurance against labor income risk is missing, regulations that provide insurance to workers (such as severance payments) reduce misallocation. However, regulations that simply create barriers to the dismissal of workers increase misallocation and end up reducing the welfare of workers. This study also provides some empirical evidence broadly consistent with the theoretical results using cross-country data. While dismissal regulations increase the share of informal employment, severance payments to workers do not.

Research limitations/implications

The empirical exercise is constrained by the lack of availability of good data on the informal sector.

Originality/value

The analysis of the alternative labor market regulations analyzed in this paper in the presence of risk-averse workers is an original contribution to the literature.

Details

Indian Growth and Development Review, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1753-8254

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Book part
Publication date: 19 November 2019

Yvonne A. Lamptey and Yaw A. Debrah

The informal sector is expanding in the developing countries while the formal sector is shrinking. The loss of employees through workforce reduction strategies has…

Abstract

The informal sector is expanding in the developing countries while the formal sector is shrinking. The loss of employees through workforce reduction strategies has adversely affected trade union membership in Ghana. To make up for the loss of members, the trade unions recruit the informal workers into their fold. Using in-depth interviews, this study explores trade union organization of informal workers and the suitability of these forms of organization within the informal sector in Ghana. The results indicate that formal trade unions are desperately adopting traditional methods and structures to organize informal workers into their fold without success. There is therefore the need for the informal workers to self-organize and for the trade unions to create streams of membership for affiliation.

Details

Advances in Industrial and Labor Relations
Type: Book
ISBN: 978-1-83909-192-6

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Book part
Publication date: 22 May 2015

Colin C. Williams

This chapter evaluates the cross-national variations in the proportion of employment that is in informal sector enterprises and evaluates competing theories which view…

Abstract

Purpose

This chapter evaluates the cross-national variations in the proportion of employment that is in informal sector enterprises and evaluates competing theories which view these cross-national variations to result from either economic underdevelopment (modernisation explanation), high taxes, public sector corruption and over-regulation of work and welfare (neo-liberal explanation) or conversely, a lack of intervention in the realm of social protection (political economy explanation).

Methodology/approach

To evaluate these competing explanations, the International Labour Organisation’s (ILO) country surveys that investigate the scale of employment in informal sector enterprise in 43 developing and transition economies, along with the World Bank database of development indicators, are analysed here.

Findings

The finding is that lower levels of employment in informal sector enterprises are closely associated with economic development, lower levels of public sector corruption and state intervention in the form of higher tax rates and social transfers to protect workers from poverty.

Research implications

This chapter reveals the need to move beyond treating these contrasting representations as competing explanations and to recognise how all are required to more fully explain the prevalence of informal sector entrepreneurship.

Practical/social implications

Tackling employment in informal sector enterprise is shown to require broader economic and social policies associated with the modernisation of economies, tax rates, social protection and poverty alleviation.

Originality/value

One of the first evaluations of the competing explanations for why some countries have higher levels of employment in informal sector enterprises.

Details

Exploring Criminal and Illegal Enterprise: New Perspectives on Research, Policy & Practice
Type: Book
ISBN: 978-1-78441-551-8

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Article
Publication date: 17 November 2014

Harshana Kasseeah and Verena Tandrayen-Ragoobur

The purpose of this paper is to analyse the characteristics of women entrepreneurs operating in the informal sector in Mauritius and to investigate the impact of women…

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1482

Abstract

Purpose

The purpose of this paper is to analyse the characteristics of women entrepreneurs operating in the informal sector in Mauritius and to investigate the impact of women entrepreneurship on their own livelihoods and that of their families.

Design/methodology/approach

Using survey data on 158 women entrepreneurs operating in the informal sector, the authors analyse whether there has been an improvement in the standard of living of women entrepreneurs as a result of their informal entrepreneurial activities.

Findings

Findings reveal that the informal sector has provided a self-employment outlet for unemployed and retrenched women in Mauritius. Even if for a majority, their earnings remain low, their informal activity has indeed helped to contribute to their livelihood and household earnings.

Research limitations/implications

Research on informal sector businesses is fraught with limitations, given that these firms operate on the fringes of legality and data are thus a major issue. Hence interviewing owners of informal sector businesses to get relevant data is quite challenging.

Practical implications

The results indicate that informal entrepreneurial activities contribute positively to women's livelihoods, hence policy should be aimed at encouraging women agency even if it is in the informal sector.

Social implications

The study helps to shed light as to whether entrepreneurship even if it exists in the informal sector helps to improve the living of these women and their families.

Originality/value

This study is innovative as it investigates the livelihood of a vulnerable section of the population, in this case, women entrepreneurs operating in the informal sector. The authors find that the informal sector provides women with higher income when they are married and are more formally educated.

Details

Equality, Diversity and Inclusion: An International Journal, vol. 33 no. 8
Type: Research Article
ISSN: 2040-7149

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Article
Publication date: 8 August 2008

H. Zia, V. Devadas and S. Shukla

The purpose of this paper is to outline the socio‐economic and environmental implications of the informal sector engaged in waste recycling in the city of Kanpur, with…

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1851

Abstract

Purpose

The purpose of this paper is to outline the socio‐economic and environmental implications of the informal sector engaged in waste recycling in the city of Kanpur, with special emphasis on the lives of lowest group of people, i.e. waste‐pickers, and to discuss various possible scenarios to integrate them with the formal sector.

Design/methodology/approach

The study involved field survey of secondary material markets, followed by the administration of questionnaires to 40 respondents belonging to various segments of the informal sector. The questionnaires were designed to elicit information on the socio‐economic characteristics of the respondents. The study was conducted in 2004.

Findings

The study has attempted to delve into the socio‐economic conditions of the waste and dump‐pickers, the lowest segment of the informal recycling sector. The study of the status of existing alliances of formal‐informal sector and the community shows that there is a lot of scope for improvement in the management of solid waste and the condition of the informal waste‐recycling sector. Stronger alliances have the potential to improve the services as well as the socio‐economic condition of the informal waste‐recycling sector.

Research limitations/implications

A very small sample size was selected for this study in the absence of any prior database pertaining to the size, socio‐economic conditions of the informal waste‐recycling sector.

Originality/value

The paper attempts to understand the important role played by the informal sector engaged in waste recycling. This work is original, as no such analysis has been carried out in the study area. This study could be further extended.

Details

Management of Environmental Quality: An International Journal, vol. 19 no. 5
Type: Research Article
ISSN: 1477-7835

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Article
Publication date: 27 June 2008

Sola Fajana

This paper aims to address the issue of unionisation of the largely non‐unionised informal economic activities as a strategy for achieving decent work and pay as well as…

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2170

Abstract

Purpose

This paper aims to address the issue of unionisation of the largely non‐unionised informal economic activities as a strategy for achieving decent work and pay as well as promoting national development in Nigeria.

Design/methodology/approach

The adopted methods include review of archival information and survey of the perspectives of the stakeholders in Nigeria's industrial relations system. To facilitate the realisation of expected developmental objectives, monitoring, evaluation, capacity building, organising and advocacy roles are recommended jointly and severally for the stakeholders.

Findings

It was found that decent work and pay, which would assist poverty minimisation and thus national development, would be furthered by unionisation of the informal sector. At the same time, there are many barriers faced by unions in seeking to organise in the latter area.

Research limitations/implications

The research focuses only on aspects of informal working; the informal economy represents a multi‐facetted and spatially diverse phenomenon.

Originality/value

This paper provides a detailed review of employment relations in non‐standard work in Africa, an area much neglected in the literature.

Details

Employee Relations, vol. 30 no. 4
Type: Research Article
ISSN: 0142-5455

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Article
Publication date: 12 October 2018

Subhasankar Chattopadhyay

This paper aims to theoretically find out whether investments could close the formal-informal wage gap in India.

Abstract

Purpose

This paper aims to theoretically find out whether investments could close the formal-informal wage gap in India.

Design/methodology/approach

The paper builds a general equilibrium model of a developing economy with a large informal sector and a capital-intensive formal sector with sector-specific capital and incorporates endogenous demand.

Findings

With homothetic preferences, a small initial wage premium and elastic relative demand, investment in the formal sector is likely to close the wage gap, but the gap persists with non-homothetic preferences. However, investment in the informal sector is unlikely to close the wage gap with either type of preferences.

Originality/value

Though labour market distortions in developing economies leading to a formal-informal wage gap are well-documented in the development literature, little attention has been given to the question of whether such a gap would close over time.

Details

Indian Growth and Development Review, vol. 11 no. 2
Type: Research Article
ISSN: 1753-8254

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Article
Publication date: 4 March 2014

Elissaios Papyrakis

The paper aims to examine the coexistence of formal and informal resource sectors in resource-dependent economies, whose production depends on an exhaustible (e.g…

Abstract

Purpose

The paper aims to examine the coexistence of formal and informal resource sectors in resource-dependent economies, whose production depends on an exhaustible (e.g. minerals) and a renewable resource stock (e.g. forest), respectively. It then examines the implications of declining mineral stocks on public revenues, labour movements between sectors, and economic growth in an attempt to elucidate the poor economic performance of many mineral-dependent countries.

Design/methodology/approach

The paper presents a theoretical model that describes the coexistence of a formal and informal resource-dependent sector, where individuals can direct their work effort. It then assesses how declining mineral stocks influence labour mobility across sectors and environmental degradation.

Findings

Decreasing mineral stocks induce a relocation of labour towards informal production and deprive local authorities from public revenues collected within the formal economy. This constrains the ability to improve infrastructure and welfare over time and simultaneously imposes pressure on the local environment.

Originality/value

The paper provides a novel theoretical mechanism that attempts to elucidate the “resource curse”, i.e. the poor economic performance of many mineral-rich economies. It purposely explores the implications of a coexistence of formal and informal resource activities on economic development for resource-dependent economies, in order to obtain new insights into this direction.

Details

International Journal of Social Economics, vol. 41 no. 3
Type: Research Article
ISSN: 0306-8293

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