Informal Economic Activities Research Articles

Fostering entrepreneurship and economic growth: pathways to economic resilience in Kosovo

This study examines economic resilience in the new born state of Kosovo. Resilience is an emerging concept, which has been employed to examine economic performance and responsiveness to exogenous shocks. Drawing on interviews with stakeholders in Kosovo, this paper contributes to the emergent literature on economic resilience by examining how policy seeks to improve resilience through entrepreneurial activity. The paper finds that entrepreneurship in Kosovo is integral to promoting the diversification and capacity building, by developing institutional arrangements to harness productive entrepreneurship and reduce informal economic activity. The paper concludes that restructuring in a post-war context is extremely challenging and requires long-term joined-up approaches, before drawing a series of recommendations concerning the wider policy implications of the study.

The Informal Economy in Sub-Saharan Africa: Size and Determinants

The multiple indicator-multiple cause (MIMIC) method is a well-established tool for measuring informal economic activity. However, it has been criticized because GDP is used both as a cause and indicator variable. To address this issue, this paper applies for the first time the light intensity approach (instead of GDP). It also uses the Predictive Mean Matching (PMM) method to estimate the size of the informal economy for Sub-Saharan African countries over 24 years. Results suggest that informal economy in Sub-Saharan Africa remains among the largest in the world, although this share has been very gradually declining. It also finds significant heterogeneity, with informality ranging from a low of 20 to 25 percent in Mauritius, South Africa and Namibia to a high of 50 to 65 percent in Benin, Tanzania and Nigeria.

Indigenous languages and the informal economy in Africa: A qualitative analysis of the economics of language dynamics in rural Kenya

There is a dearth of research on the economics of language of Africa’s official and national languages, not to mention non-official, non-national indigenous languages. The article seeks to fill this hiatus using qualitative data from rural Kenya. A key finding is the discovery and characterisation of reciprocal/symbiotic relationships between indigenous languages and informal economic activities which are amplified by adaptive broker-agent relationships at the indigenous languages/informal economy interface and three-dimensional resilient networks of linkages between non-official, non-national indigenous languages and the informal economy that largely defy the asymmetries that define and characterise the relationships between these languages and the formal economy in much of Africa. On the basis of these insights, the article argues that the linkages between non-official, non-national indigenous languages and the informal economy in Africa hold promise for discourses, processes and interventions that seek to engender the viability, vitality and resilience of indigenous languages on the continent.

The Evolution of the Informal Economy in North Korea

I. IntroductionNorth Korea's Public Distribution System (PDS) of grain broke down during the so-called Arduous March in the mid- and late 1990s. This economic crisis led many households to rely on informal economic activities (IEAs) that had been previously repressed by the North Korean authorities. The authorities decided to tolerate such household activities, without which a considerably worse economic disaster would occur. Consequently, the informal economy in North Korea substantially increased in this period.The informal economy existed in other socialist countries such as the Soviet Union. The majority of economists maintain that the Soviet informal economy was large (Grossman 1987; Ofer, and Vinokur 1992; Kim 2003). For example, Grossman (1987) estimates that in the late 1970s, private income accounted for 33% of the total income of urban households. By using classified Soviet archival material, Kim (2003) provides annual estimates of the informal economy from 1969 to 1990. The average share of Soviet households' informal expenditure in total expenditure was 23% during the above period. Furthermore, certain economists ascribe the collapse of the Soviet socialist system to IEAs that range from household's private economic activity to bribery and even organized crime (Treml, and Alexeev 1994; Grossman 1998; Solnick 1998; Wintrobe 1998).1 These debates produced a number of studies on the informal economy in a socialist system.2The emergence of the informal economy in North Korea also elicited considerable research attention. Scholars have not only analyzed the size and determinants of the informal economy, but also its effects on the economy (Lee 2007; Kim, and Song 2008; Haggard, and Noland 2009; Lee 2009; Kim 2009; Kim, and Koh 2011; Kim, and Yang 2012). Most research that uses surveys of North Korean refugees finds that the size of informal economy in the North Korean households is at least 70% in terms of the share of total income as well as labor force participation rate. Therefore, North Korea's informal economy is extremely large with a scale that was not found in any former socialist countries.Compared with the size of the informal economy, its evolution over time attracted relatively less attention mainly because of the deficiency of the data. This is a significant research gap because the dynamics of the informal economy may have important implications for the future of not only the North Korean economy but also its society. Although studies on this issue have been conducted, their findings are based either on aggregated figures or on some case studies. For example, Kim and Song (2008) find that labor participation rate in plot-related activities or stockbreeding significantly increased from 2002 to 2004, whereas market trading did not during the same period. Kim and Yang (2012) evaluate the effects of different market policies by the North Korean government (i.e. appeasement policy vs. anti-market policy) on the informal economy, and find little evidence on an increasing trend of the informal economy from 2002 onwards. However, the above studies are based on a simple test of whether significant discrepancies occur in the size of the informal economy between different periods at the aggregated level; that is, the participation rate in the informal economy. As regards case studies on the development of the informal economy, Kim and Yang (2014) report the specialization of IEAs by illustrating diverse cases that include suraegi, which indicates a manufacturing dealer. By using in-depth interviews of 39 North Korean refugees, Lee et al. (2014) assert that markets for consumer goods and services have been expanding. However, these studies are insufficiently rigorous because of the method of analysis based on the small sample.This study aims to contribute to the literature in two respects. First, we use a large dataset of North Korean refugees settled in South Korea accumulated from 2004 to 2011 to investigate the dynamics of the IEAs in North Korea at the individual level. …

Collaborative mapping of emerging cities in developing countries: the León Emergente project

ABSTRACTIn the expanding constellation of collaborative map-making initiatives, a growing number of small local projects coexist along with more ambitious and global ones. In developing countries, their existence is not only compatible and complementary, but also necessary, since they meet different needs and pursue diverse and essential objectives, in addition to collecting and sharing geo-located data. In this context, this paper describes the León Emergente initiative, a collaborative living atlas for the city of León in Nicaragua. The results are presented through two main maps that illustrate, for the first time, the formal and informal economic activity of the city as well as the health facilities in relation to the distribution of population across the city. The paper also describes the Leon Emergente online platform and presents a number of online maps that not only represent, but also collect data on different urban aspects and dynamics.

Struggles to form business improvement districts (BIDs) in Los Angeles

Autonomous efforts to improve local business environments have become an increasingly important impetus for economic development. Business improvement districts (BIDs), as one of such autonomous organisations, have clearly demonstrated benefits for promoting commercial areas over the last two decades. When BIDs spread over a city, however, not every commercial district succeeds in establishing BIDs despite some initial efforts. This research examines the types of challenges that these neighbourhoods experience in order to form BIDs. This study is based on census data analyses and in-depth interviews with city employees, BID consultants, executive directors of BIDs and community stakeholders in Los Angeles. The results show that the areas with unsuccessful attempts of BID formation in Los Angeles are relatively low-income immigrant neighbourhoods. Some of these neighbourhoods have struggled with disengaged property owners, spatial conflicts among diverse ethnic groups, immigrants’ skepticism towards government and the chronic presence of informal economic activities. These findings suggest that some disadvantaged neighbourhoods are not adequately informed or organised to form BIDs. Public officials and community workers can support these neighbourhoods by providing direct assistance for the development of collective vision and action among community stakeholders.

Political Instability and the Informal Economy

Understanding the determinants of the informal economy is a crucial issue in economic development because of its effect on economic performance as well as undermining the construction of indicators to monitor economic development. While the focus on the literature has been on the proximate causes of informal production, such as taxation, we investigate the political environment that causes governments to choose policies that allow the informal economy to develop. We argue that the political environment affects the government’s incentive to invest in the efficiency of tax collection, and therefore the ability of the government to detect informal production. We show that political instability, social polarization along ethnic and religious lines, and an autocratic authority pattern are associated with a larger informal economy. The results suggest that efforts to reduce informal production should shift from an emphasis on the proximate causes to political reforms. Since polarization along ethnic and religious lines is structural, reforms should focus on reducing political instability and autocracy. However, the results imply that democratic reforms that change the authority pattern from autocracy to democracy can increase informal economic activity if it increases political instability.

Entrepreneurial Competencies and Performance of Informal Micro-Enterprises in Malaysia

Literature on informal economic activities has identified the significant role of informal micro-enterprises in national development and the role of entrepreneurial competencies in micro-enterprise performance. This study, therefore, examined the role of entrepreneurial competencies, i.e., risk-taking propensity, need for achievement, self-efficacy, and experience in informal micro-enterprise performance in Kelantan, Malaysia. This study used a cross-sectional design and collected quantitative data from 197 informal micro-entrepreneurs. Findings of the path analysis using variance-based structural equation modeling (SEM-PLS) revealed that informal micro-entrepreneurs’ risk-taking propensity and self-efficacy have a significant positive effect on micro-enterprise performance. Development programs and policies should, therefore, focus on increasing low-income informal micro-entrepreneurs’ self-efficacy and ability to take risks in order to take advantage of all the income-generating opportunities available to them, which would ultimately lead to the improvement of the socio-economic condition of low income households in Malaysia. DOI: 10.5901/mjss.2016.v7n3p273

Social Capital and the Shadow Economy

Viewed in a wider context of paid and unpaid informal economic activities, the shadow economy highlights the little recognized ambivalence of social capital as both potentially positive and negative in outcomes for different groups in the economy. Using a concept of social capital as access to durable networks of actual and virtual resources, as claimed by Pierre Bourdieu, I examine the shadow economy as a source of both resilience and repression, intimately connected to the formal economy and tied to a neo-liberal agenda. I draw from review activities I have previously conducted on the informal economy in disadvantaged neighborhoods and from research on social capital in the economy in a European context.

Sexual services, drugs and human trafficking, smuggling – in GDP figures: Quality of life indicators

In recent years different kind of antisocial and criminal activities, according to the EU regulations, are being included in GDP indicators. The activities, included in GDP indicators are as follows: those of criminal nature (drugs, arms and human trafficking, corruptive activities, etc.); illegal activities, which are not of criminal nature (businesses without licenses and special permits, poaching, etc.); legal activities, though the income from them is not taxed and not recorded (prostitution, alcohol production, etc.); illegal use of intellectual property objects (illegal use of unlicensed programmes). Estimates on the inclusion of illegal, among them criminal activities in GDP indicators are important not only to learn the actual size of GDP, but also to give a chance to the law enforcement authorities to pay attention to separate areas of unregulated economic activities. The author of the article outlines the approximate extent of illegal and informal economic activities and their share in GDP, describes the methods of determination of the economic sector, as well as analyzes some separate informal economic sectors, which should be included into GDP.

The effect of informal employment and corruption on income levels in Brazil

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 large 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%.

Illicit food: Canadian food safety regulation and informal food economy

Food economies that take place informally or ‘under the table’ can offer interesting insights into relationships that people have with their food, and with social and institutional frameworks that shape their food systems. Relying on data from 14 in-depth interviews conducted in Nova Scotia in 2013, this paper interrogates the tensions between everyday eating practices and food safety regulations. Specifically, I examine how informal economic activities related to food expose some of the (perceived) shortcomings of those regulations. The stories that the participants shared offer a glimpse into the world of meaning attached to a range of practices that exist on the margins of contemporary food and public health systems. These stories and the associated practices challenge current regulatory policies as scale-inappropriate, and criticize the industrial food system as inadequate for meeting the needs of contemporary eaters. My analysis offers a cultural studies perspective on food safety regulation and on ideological resistance embedded in informal food economies. I illustrate this with a specific example of raw milk to further probe how people engage with their food and how they navigate through the world of food safety – and more generally public health – regulations.

International Trade, Migration and Unemployment – The Role of Informal Sector

This paper provides an elaborate general equilibrium framework by including informal economic activities in a model of trade, migration and unemployment. Existence of informal activities is critical in generating positive employment effects of liberal trade policies. Following a tariff cut informal wage increases and rate of unemployment goes down under reasonable conditions. Next we generalize the benchmark model to capture the phenomenon of sequential migration: from agriculture to urban informal sector, and then to urban formal sector. Positive employment effect of reformatory trade policy partly owes to the fact that the presence of informal sector directly reduces the cost of migration and, hence, further induces the process of outmigration from agricultural sector. The paper also extends the benchmark model to include both informal intermediate and final good.

Informality and macroeconomic volatility: do credit constraints matter?

Purpose– The purpose of this paper is to study the implications of borrowing constraints characterizing the informal sector for macroeconomic volatility.Design/methodology/approach– To this end, the author develops a simple dynamic stochastic general equilibrium model wherein registered activity not only is the basis to determine tax liabilities, but also serves as collateral for securing debts. Such a framework allows for computational experiments to analyze the effect of informality on aggregate fluctuations.Findings– The experiments show that the credit-constrained informal sector does exert a significant influence on the cyclical volatility of consumption and investment.Originality/value– There are not many studies addressing the implications of informal economic activities for macroeconomic fluctuations. This paper contributes to the literature by developing a theoretical model showing that credit constraints characterizing these activities might play a non-negligible role in explaining the cyclical volatility of some important aggregates.

Intelligence and gender (in)equality: Empirical evidence from developing countries

This paper makes an attempt to explore whether intelligence of nations is related to gender inequality, measured by Social Institutions and Gender Index (SIGI), in developing countries. Related literature robustly links intelligence to economic development, poverty, quality of institutions and informal economic activity. Controlling for conventional antecedents of gender inequality (i.e. religion, political regime, legal origins and trade openness), this paper finds that, on average, a 10-point increase in national IQ scores in the developing world is associated with an 8.2 point reduction in SIGI, ceteris paribus. To test the robustness of our findings we apply instrumental variables (IV) and robust regression methods. We also test whether our results are sensitive to the choice of control variables and heterogeneity of nations in our sample. The negative association of intelligence with gender inequality remains statistically significant and intact in all cases.

Informal economic relations and organizations

Purpose– The purpose of this paper is to identify the role of informal economic relations (IER) in the day-to-day working of organizations, thereby opening a way to theorizing and informed practice. The authors will present and discuss about the manifestation of informality in “everyday” reality of Soviet and transformation economies. Informed by Cultural theory and in particular the work of Gerald Mars, the authors are taking account ontologically and methodologically of Labour process theory.Design/methodology/approach– Through presentation of ethnographic data of detailed accounts and case vignettes in production and retail in the Soviet period of the late 1970s and 1980s and from the construction sector in contemporary Russia, with a focus on the labour process, the authors inform and discuss key processes in the informal working of organizations.Findings– In the Soviet system the informal economy co-existed in symbiosis with the formal command economy, implicitly adopting a “live and let live” attitude. In addition, informal relations were essential to the working of work organizations, sustaining workers’ “negative control” and bargaining power. contemporary Russian capitalism, while embracing informal economic activities, a legacy of the Soviet period, advocates an “each to his own” approach which retains the flexibility but not the bargaining space for employees. That facilitates exploitation, particularly of the most vulnerable workers, with dire consequences for the work process.Research limitations/implications– The paper provides a platform for theorizing about the role and place of IER in organizations. Of importance to managerial practice, the paper informs on those aspects of the work routine that remain hidden from view and are often excluded from academic discourse. The social implications are profound, shedding light on central issues such as recruitment, income distribution, health and safety and deregulated forms of employment.Originality/value– The paper examines economic behaviour under different economic-political regimes demonstrating continuities and changes during a fundamental social-economic reorientation of an important regional economy, through close observation at the micro and meso-level of, respectively, the workplace, organizations and industry, outlining theoretical, practical and social implications.

Vivienda social y estrategias de sobrevivencia: Soluciones adecuadas a partir de un estudio de caso (Resistencia, Argentina, 2013)

In Argentina housing solutions do not properly meet the needs of low-income households that use social housing both as a dwelling and for the development of informal economic activities necessary for their survival. Households in these conditions transform the public housing into domestic units of production and reproduction of life, with consequent negative effects on living conditions and the quality of life of these homes. This paper analyzes this issue from a comprehensive and complex approach to habitat by investigating a case study in the city of Resistencia (Argentina). The aim of this research is to generate contributions that may influence public housing policies and provide appropriate solutions for the achievement of decent housing.

Decolonisation and Ideology: Preconditions for Urbanism in Late Colonial Port Moresby

Hart's informality occurs in market economies when people are unable or unwilling to conform with the guiding orthodoxy of the State. In Papua New Guinea (PNG) after the second world war an ideology of 'economic development' was adopted by the colonial State. Bureaucratic norms established to support Australian colonial notions of 'development' were confronted by transgressive (that is, informal) behaviour on the part of indigenous people. Such behaviour included unauthorized migration to Port Moresby, squatting on urban land and unauthorized home-building, all of which substantially altered the physical fabric and social character of the capital. The paper describes how Port Moresby gradually moved towards a more stable and committed urban workforce supporting a 'normalized' population structure, although this process was still incomplete by self-government in 1973. By then, however, Port Moresby had progressed a long way from being an Australian colonial town towards assuming the status and characteristics of a Third World city, with increasing 'space' for informal economic activities. Late colonial PNG is shown as having been an obsolescent society and economy, a condition originating in the nexus between retarded urbanism, archaic processes of wage determination and low labour productivity -- a Gordian knot for policy-makers.

Transactions and Interactions: Everyday Life in the Peacekeeping Economy

This article introduces and justifies the concept of the peacekeeping economy. The peacekeeping economy refers to economic activity that either would not occur, or would occur at a much lower scale and pay-rate, without the international presence. In particular, the concern is with the formal and informal economic activity that directly links the international presence with the local individual. The approach thus foregrounds empirical research that relies on sources missing from most work on peacekeeping and peacebuilding, such as sex workers; domestic workers; security guards; drivers; service workers; others in the informal sector; subcontracted workers; and UN national staff—in addition to international personnel and local elites. The article argues that this approach allows certain aspects of peacekeeping missions to be observed that would not otherwise be seen: the practice and politics of the ‘everyday life’ of those involved in a peacekeeping mission, and those living with and alongside these missions. The article also introduces the various contributions to this special issue in light of some of the most pertinent themes and issues raised by the peacekeeping economy approach.

Eldercare, immigration, and health care in Italy: How the Italian state creates and mitigates inequality

AbstractThis article considers the role of the Italian state as both a source of inequality and an institution that mitigates inequality. Fieldwork completed in Genoa in 2010 focused on the intersection of immigration policies, care work needs, and the informal economy revealed in the lives of immigrant in‐home care workers. Genoa, the largest city in the region of Liguria, is the “oldest” city in Europe, in that 33 percent of the population is now older than 60 years of age. In Esping‐Andersen's typology, Italy's Mediterranean‐familialist‐style welfare regime is characterized by a high dependence on family members to provide care, few state‐supported services for elders, and a shortage of policies that reconcile care and work. This combination places the burden of care for family elders on female relatives, thus perpetuating gender inequalities. In Italy, the relatives of the elder needing care often shift their burden onto low‐wage immigrant laborers. In households employing care workers in Genoa, examining how Italian state policies regarding eldercare maintain ethnic, class, and gender inequalities illustrates how state forces influence private realities. In addition, the well‐established practice of regional autonomy has transformed the Italian national health care system, as it is manifest in the region of Liguria, into a sociocultural institution that mitigates inequality in health care access as it serves both citizens and immigrants. However, this institution also supports unequal working conditions in that it supports informal economic activity by maintaining the health of the low‐wage, immigrant workforce critical to the well‐being of the elders of this region.