Informal Sector Research Articles

Diffusion dynamics of the informal sector sustainable innovations: Exploring cases of grassroots innovations in India

Over the last two decades, researchers, policymakers, and practitioners have focused on the innovations in the informal sector, particularly grassroots innovations (GI) from low-income countries. Such innovations' diffusion dynamics, however, are uncharted territory. As a result, this paper explores the diffusion of GI from India's informal sector. We chose ten GI and gathered data in ex-situ and in-situ conditions using a case study method. The data is analysed on four parameters of diffusion of innovation (DOI) theory by Rogers. The findings imply that the GI provide sustainable, and a low cost perceived use value while other innovations from the formal sector are either expensive, unavailable, or do not see it as a potentially profitable enterprise. Furthermore, informality vis-à-vis communication and social structure have a significant impact on diffusion of GI. Time dimension may not be as important for the informal sector innovations. The formal sector actors are more involved in dissemination of GI, employing new means. Finally, we discuss how DOI theory may be applied in the informal sector and how it can aid in alleviating GI diffusion concerns.

Are Informal Older Workers Utilizing Less Healthcare Services? Evidence from the Longitudinal Ageing Study in India, Wave-1

AbstractIndia’s informal sector employs many workers without social security benefits, such as pension support and health insurance. Many older workers continue to work in this sector beyond the retirement age (60 + years) due to financial and health needs. Given the vulnerable position of informal older workers in terms of their social and economic stature, as well as the increasing burden of non-communicable diseases, it becomes important to study healthcare utilization. The present research aims to investigate variations in healthcare visits by type of work in India for older workers. The first wave of LASI (2017-18) data has been used in this study. The overall healthcare visits, consisting of inpatient and outpatient care, are considered as the outcome variable for the analysis. Zero-inflated Poisson regression is applied to study the relationship between type of work and healthcare visits while controlling for other covariates. The results of zero-inflated Poisson regression shows that informal workers have fewer healthcare visits than formal workers (P < 0.01). However, the relationship between type of work and healthcare visits is influenced by health conditions, including chronic health conditions (CHC), depression as well as both CHC and depression. Informal workers with depression visit 0.892 times less (P < 0.05) than formal workers with depression. Informal workers with CHC and depression visit 0.847 times less (P < 0.0001) than formal workers with CHC and depression. The present study underscores the importance of proper economic support and healthcare provision to financially encourage older workers belonging to poor social-economic status to seek for healthcare services.

Uptake of health insurance by the informal sector workers at Kenyatta market, Kibra sub-county, Nairobi County, Kenya

Uptake of health insurance by the informal sector workers at Kenyatta market, Kibra sub-county, Nairobi County, Kenya

The informal economy and the reach of policy interventions: Evidence from the COVID‐19 lockdown in India

The informal economy and the reach of policy interventions: Evidence from the <scp>COVID</scp>‐19 lockdown in India

Analysing the heterogeneity in working conditions of migrant informal workers in China: a test of the WIEGO model of informal employment

This paper sheds light on the internal heterogeneity within the informal economy by examining the working conditions of migrant informal workers in China. It presents the first attempt to test the WIEGO model on the relationship between informality, income, poverty and gender. Based on 107,020 samples of informal workers from the 2017 China Migrants Dynamic Survey (CMDS), economic, social and occupational health components of working conditions of migrant informal workers in five employment-status tiers are analysed. The results show the significant heterogeneity within informal workers in terms of their income, working intensity, labour contracts, social security, union and community support. The relationships between the informal employment tiers and income, poverty and gender show a pattern that is not fully in line with the WIEGO model, suggesting the complexity and plurality of heterogeneities in informal employment. The paper concludes by calling for research on regional varieties of the heterogeneity in informal employment worldwide to better understand the unfolding of the inequality-informality nexus in specific contexts.

MULTICULTURAL EMPLOYEES’ PERCEPTIONS OF DIVERSITY IN SOUTH AFRICA

Purpose: This research explored the in-depth meaning of how multicultural employees perceive diversity in South African formal sector firms. In doing so, it extracted the lived experiences of multicultural employees about the cultural differences perceived within the country. South Africa is characterised by cultural and linguistic heterogeneity and a relatively large formal sector economy by African standards. Methodology: For this cross-sectional study, data were gathered through a homogeneous purposive sampling of nine participants and conducting semi-structured interviews. This small sample size allows for a thorough investigation into each participant's lived experience to gather qualitative data. The specific phenomenological method used in this study is a novel interpretative phenomenological analysis (IPA), which seeks to extract data and discern meaning in the participants' narratives. Results: The findings were interpreted through the lens of social identity theory within an interpretative philosophical paradigm. These interpretations were leveraged to extract a central narrative that is grouped thematically. The main finding was identifying several factors that contribute to the spanning of cultural boundaries in South African formal sector firms. Practical Implications: The study identified how participants make meaning of their experiences within the formal sector of South Africa and how their interpretations shape their behaviour and attitudes. Originality/Value: The findings indicate that a significant amount of intra-country cultural diversity is perceived in the South African formal sector workplace, which can cause friction and reinforce cultural stereotypes.

Informal Incentives and Labour Markets

Abstract This paper investigates how labour-market tightness affects market outcomes if firms use informal, self-enforcing, agreements to motivate workers. We characterise profit-maximising equilibria and show that an increase in the supply of homogeneous workers can increase wages. Moreover, even though all workers are identical in terms of skills or productivity, profit-maximising discrimination equilibria exist. There, a group of majority workers is paid higher wages than a group of minority workers, who may even be completely excluded. Minimum wages can reduce such discrimination and increase employment. We discuss how these results relate to empirical evidence on downward wage rigidity, immigration, the gender pay gap, and credentialism.

Do Retailers Compete Against Informal Firms? A Comparison of the Periods of the Global Crisis and Post-Crisis

This study investigates the transformation of competitive dynamics between formal sector retailers and their informal sector counterparts in Eastern European and Central Asian countries after the 2008-2009 global financial crisis. The absence of extensive government bailouts in these regions intensified the economic repercussions of the crisis. This study used data from the BEEPS II and BEEPS IV (i.e. Business Environment and Enterprise Performance Survey) surveys conducted by the European Bank for Reconstruction and Development and the World Bank with a focus on informal competition in Eastern Europe and Central Asia based on data from owners or top-managers of companies working in this region. To investigate the impact of the global crisis on informal competition for retailers, survey results in 2008 (“crisis period”) were compared with the data in 2013 (“post-crisis period”). Non-parametric tests, specifically the Mann-Whitney-Wilcoxon tests, were used to compare the 2008 and 2013 results. Binary logistic regressions were used to identify factors influencing the perception of competition from the informal sector (Pearson correlation coefficients and assessed Variance Inflation Factors to detect multicollinearity issues). Findings reveal a significant shift post-crisis shift with a reduced proportion of formal sector retailers competing with informal firms. Notably, this effect is statistically insignificant for retailers with sole proprietorships and partnerships and those with internationally recognized quality certifications. Moreover, research highlights a diminished perception of informal competitors as substantial hindrances to retailers’ business operations post-crisis. However, this observation is not statistically significant for retail businesses structured as partnerships. Logistic regression indicates that smaller firms, firms led by a more experienced top manager, and firms with a female top manager are more prone to perceive competition from the informal sector. Furthermore, this study delves into the factors shaping retailers’ perceptions across post-Soviet and other transition countries, revealing differences in the impact of firm size and female ownership. This nuanced investigation contributes depth to the current literature concerning the interconnections between formal and informal retail sectors. It offers a comparative analysis focusing on post-Soviet states and other transitioning nations in Eastern Europe and Central Asia.

IMPACT OF SOCIAL CAPITAL ON PERFORMANCE OF INFORMAL SECTOR FIRMS: EMPIRICAL STUDY USING INDIAN FIRM DATA

Informal sector enterprises are the businesses that do not registered under the government and therefore not entitled for taxations. Social capital refers to the human networks and relationships people often maintain on their development. Three main types of informal businesses considered in this study are manufacturing, reselling and provision of services. They play a significant role in contributing to the global economy especially in developing countries. The study aimed to examine the impact of social capital on informal businesses. The study further explores the mediating effects of Covid pandemic and female ownership on the informal business performance. Secondary data for the study was obtained from World Bank Enterprise Survey website and the dataset was selected in the Indian context as India is one of the leading countries in South Asia where informal businesses have closer proportion of national economy. Dependent variable, informal business performance was measured in terms of profit and total sales, whereas the independent variable, social capital was measured using a self-developed scale by the author. Multiple regression, instrumental variable regression and censored regression (tobit) models have been used in analysis. The STATA version 11.1 is used as the statistical tool. The regression results show a strong positive relationship among the social capital and informal business performance, while the mediating effect of the global pandemic and female ownership on informal business performance were not significant.

Alguém se meteu no meio: modelos de intermediação digital do trabalho doméstico no Brasil

Informality is a reality for three-quarters of domestic workers in Brazil who, without a formal employment relationship, are not protected by the legal guarantees established since 2013. This lack of legal protection is exacerbated by the emphasis on entrepreneurship promoted by a growing number of digital platforms offering domestic work intermediation. In this article, we examine the structural standards of digital intermediation companies for domestic work in Brazil. Four representative platforms (GetNinjas, Parafuzo, Helpty, and Crafty) were analyzed. Our research corpus consists of their websites and applications, their terms of use, as well as journalistic articles and complaints from workers and clients on the website Reclame Aqui. The results are presented in three parts: (i) the history and general characteristics of each platform; (ii) their content organized into four categories of analysis (marketing, hiring, remuneration, and reputation systems); and (iii) the accounts of clients and workers on the Reclame Aqui website. The study found that digital intermediaries for domestic work present complex challenges for workers, as they amplify existing risks in the dominant labor model, such as intense subordination, economic dependence, lack of transparency about the value of their work, and exclusion from legal labor protection, whose recent expansion has not resulted in effective change. The study also suggests that this intensification of risks increases directly with the degree of intervention by the digital intermediary in the client-worker relationship.

Informality, Rule-of-Thumb Consumers, and the Effectiveness of Monetary Policy in Emerging Economies

This paper investigates how the presence of a large fraction of rule-of-thumb consumers and an informal sector and (henceforth, informality) impact on the effectiveness of monetary policy in developing/emerging economies. We develop a small open economy New-Keynesian model, which is estimated using data on selected Sub-Saharan African countries where the coexistence of these two frictions is widespread - Burundi, Malawi and Rwanda. The results reveal that (i) rule-of-thumb consumption enhances the dominance of demand shocks and makes inflation stabilization a challenge; (ii) the presence of an informal sector causes supply shocks to be dominant, creating a trade-off between stabilizing inflation and output; (iii) rule-of-thumb consumption weakens the transmission mechanism of monetary policy while its interaction with informality worsens the situation in most of the selected countries; (iv) informality amid a large population of rule-of-thumb consumers causes the nominal interest rate to counterintuitively decline in response to a contractionary monetary policy shock; (v) in some of the selected countries, a positive productivity shock counterintuitively triggers a nominal exchange rate appreciation when informality interacts with rule-of-thumb consumption behavior; (vi) the coexistence of informality and rule-of-thumb consumption behavior amplifies country-risk premium shocks and; (vii) rule-of-thumb consumption behavior is welfare enhancing. These findings are informative to policymakers, particularly in emerging economies, on the priority reforms as they transition to inflation targeting frameworks. Direct policy implications emerge regarding financial inclusion, the size of the informal sector, and farm input subsidy programs.

Determinants of Digitalization in Unorganized Localized Neighborhood Retail Outlets in India

The increase in digital disruptions and changing preferences of different stakeholders has led to digital adoption in all hierarchies of business ecosystem. This study focused on the identification of the determinants of digitalization in unorganized small, localized retail outlets (Kirana stores) of an emerging economy. A theoretical model was constructed with certain modifications based on technology adoption models such as Technology Acceptance Model (TAM) and Unified Theory of Acceptance and Use of Technology 2 (UTAUT2) to study the impact on business performance in general and as an effect of pandemic. A survey of 285 Unorganized Localized Retail Outlets Stores from different regions of India was used to validate this theoretical model, and structural equation modeling was then further employed. The findings underscore that cost, compatibility, perceived ease of use, and perceived usefulness significantly affect the intention to digitalize. By addressing the post-pandemic impact of digitalization within an unorganized sector in an emerging economy, this study adds to the scant literature that exists in this context.

The Training for Soft Skills Development for Youth in Kadumaneuh Village, Pandeglang, Banten

Based on the Village Development Index figures released by the Ministry of Villages, Development of Disadvantaged Regions and Transmigration, Kadumaneuh Village in Pandeglang Regency is a village that is included in the developing village group. Relevant training is carried out in the village, one of which is soft skills training for the youth of Kadumaneuh Village, Pandeglang Regency, as energetic and innovative village drivers. Community development activities in Kadumaneuh Village aim to help the young find the best jobs to improve the welfare of the village community and provide training on soft skills that young people must have to become competent individuals in the future who can develop Kadumaneuh village. The method used in implementing this activity is training and is supported by a set of computer tools to access all information about work and increase their skills. The development of soft skills can have various positive implications. Young people who have these skills will more easily get jobs in both the formal and informal sectors, and they can be better at marketing village products and establishing collaboration with outside parties. Soft skills also include learning abilities; young people will find it easier to access information, and youth can participate actively in the village development decision-making process.

Intra-Africa trade and the need to rethink the neo-liberal approach

Notwithstanding past trade reforms, trade in Africa and particularly intra-Africa trade, remain dismal. Africa has even created economic communities, fitted with monetary, fiscal, and socio-political anchors, by way of various Regional Economic Communities (RECs) – now reflected by the African Continental Free Trade Area (AfCFTA). Whilst these have yielded marginal benefits, the persistence of low intra-Africa trade calls into question their suitability. Focused on the realities of institutions targeted by these reforms and Africa's context – i.e., weak linkages between institutions, high informality, and low social capital – we posit that reforms have not elicited the hoped-for high intra-Africa trade because of their near total reliance on the neo-liberal approach, which neglects Africa's context. Drawing on Africa's sociology and new institutional economics, we use a conceptual institutional analysis to evolve a political economy based framework that suggests potential solutions: Linking the formal sector that currently underpins economic/trade policies to the informal institutions that are reflective of Africa's norms, values, cultures and expectations (the informal sector), and scaling up production; via the cooperatives production model, strategic procurement mandates, and effectuation of continental transportation infrastructure network, are our recommended pathways to reversing the current dismal intra-continental trade.

Public policies and the future of agriculture in Cameroon: A case study of the “Tree Year Special Youth Plan”

While national statistics report a seemingly low youth unemployment rate, a closer look reveals a dominance of underemployment, particularly within the informal sector, and there exists a critical gap regarding the effectiveness of government intervention design to address this challenge. The objective of this paper is to study the effect of the Tree Year Special Youth Plan (TYSYP) on enterprise viability and the improvement of youth employability in the rural sector of Cameroon. This highlights the urgency of addressing this issue in Africa, particularly considering the high rates of youth underemployment in rural areas. Analysing the effectiveness of Cameroon's TYSYP programme, this study offers valuable insights to inform policy decisions and contribute to achieving the SDGs for decent work, sustainable food production, and gender equality. In this study, we adopt a positivist stance using a hypothetico-deductive approach. The data used come from the database of the National Youth Observatory (NYO) and the Department of Youth Economic Empowerment (DYEE), which consists of 1108 young people financed and set up by the TYSYP. Preestimation tests (correlation tests) combined with ordinary least squares regression led to two major results. The TYSYP has a positive and significant effect on the viability and employability of rural youth businesses. The sensitivity analysis shows that government policy, represented here by the amount of the project, has a positive and significant influence on the viability of the projects. However, although this policy has a positive and significant impact on employment for men, it is not significant for women. This study contributes to policy discussions on youth empowerment, rural development, and agricultural investment in Cameroon by highlighting the importance of intensifying the program to provide more comprehensive support for young rural entrepreneurs, particularly by focusing on financing larger-scale processing projects. Additionally, targeted initiatives are needed to address gender barriers and encourage young women's participation in these activities. This combined approach has the potential to increase long-term investment in the agricultural sector and develop rural areas through infrastructure.

Minimum Wages, Inequality, and the Informal Sector

Minimum Wages, Inequality, and the Informal Sector

Understanding the Dynamic Linkages: Inflation, Real Balances, and Their Impact on Economic Growth in ECOWAS

This study examines the dynamic relationship between growth, inflation, and real money balances in the Economic Community of West African States (ECOWAS). We apply a new approach by extending comprehensive econometric methods so that monetary dynamics can be better understood in the West African sub-region. The study obtained data from the World Bank from 2006 to 2021 and covered 15 countries. For robustness checks, we estimate dynamic ordinary least squares and fully modified ordinary least squares. These findings reveal the existence of a significant cointegration relationship between growth, real balance, and inflation. Furthermore, this study found that real balance has a positive long-run dynamic impact on growth. Likewise, there is a short-run positive impact of money and inflation on growth. We contribute to the literature on the money-growth nexus by focusing on West Africa, which faces macroeconomic vulnerabilities due to structural imbalances. These findings have policy implications for central banks and the Fiscal Agency. Central Banks must collaborate to reduce money in the informal sector, while Fiscal Authorities must control inflation collectively.

The integration of Albanian women in the Balkan and European labor market

Abstract The integration of Albania in the EU is one of the greatest aspirations that Albanian citizens have in their future. The effort to adapt the workforce of Albanian citizens to the European market has been positive. This can be seen in the number of Albanian women who have moved and continue to move in the EU countries. The emancipation of women has led to an increase in the level of education and an increase in the professional level. The integration of women as equal power in Albanian families makes it possible for the spirit of gender discrimination to decrease significantly. The presented study will be based on the inclusion of the Albanian woman in the European market as well as her emancipation in professional development. The review of information includes the analysis of relevant and available data and sources (reports, reports from previous surveys, research, etc.) regarding the needs of the labor market. In this paper we will analyze the relationship between gender, education level, age and salary level. Each of these factors in the economy has defined roles, based on the primary indicators and on the distinguishing indicators of everyone’s knowledge in this scheme, but with a common goal to serve the stability and growth of the Albanian economy. The registered unemployment rate for 2011 was 13.3% of which women represent 14.3% and men, 12.4%. The highest unemployment rate corresponds to the 15-29 age group and it is estimated that there is at least 50% employment in the informal economy. The purpose of this paper is to analyze the women’s labor market in Albania based on the statistical data of INSTAT with a focus also in the EU and the Western Balkan market by using the linear regression method.

Fostering decent jobs, formalising informal employment and spurring job mobility in MENA countries

AbstractLongstanding evidence in Middle East and North Africa (MENA) countries shows a high prevalence of unemployment and informality among a large fraction of population, and at the same time gender disparities in labour force participation and occupational mobility. Why is there such persistent labour‐market segmentation? What is the impact and potential of various formalisation policies? An overview of the informal economy across three middle‐income MENA countries (Egypt, Jordan and Tunisia) is provided with respect to taxonomy, coverage and drivers. Transition matrices and multinomial logistic regressions are applied to longitudinal microdata from Labour‐Market Panel Surveys, focusing on workers' occupational mobility in relation to their previous status, age cohort, gender and other demographics. Persistent segmentation and low occupational mobility in all countries suggest that informal employment is not driven by choice on the labour supply side but by structural constraints on the demand side. Existing formalisation policies based on distinct stick and carrot strategies, and targeting of existing businesses and workers achieve rather modest impacts. One recommendation to supplement policies for decent jobs creation is to promote social and solidarity enterprises and extend microfinance to informal enterprises.

Legislation for advancing women’s leadership in the health sector in India and Kenya: a ‘law cube’ approach to identify ways to strengthen legal environments for gender equality

ObjectivesThis paper examines the availability of legal provisions, or the lack thereof, that support women to progress equitably into leadership positions within the health workforce in India and Kenya.MethodsWe adapted...