Informal Sector Research Articles

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...

Social mobility and CCT programs: The Bolsa Família program in Brazil

We investigate long-term outcomes related to social mobility and their determinants for low-income Brazilian households. More precisely, the first cohorts of beneficiaries of the Conditional Cash Transfer (CCT) program Bolsa Família (BFP); children aged between 7 and 16 in 2005, who are tracked for over a decade, until 2019. We use individual-level administrative data to analyze our two indicators of social mobility: (i) future emancipation from federal government social programs, and (ii) access to the formal labor market. We observe that formerly vulnerable children, beneficiaries of the CCT, find themselves in better socioeconomic conditions in adulthood. While 64 % of them, aged between 21 and 30 years in 2019, were no longer beneficiaries of federal government social programs, 45 % accessed the formal labor market at least once between 2015 and 2019. We also compare the characteristics of the formal employment they access with those of non-BFP beneficiaries during the same period. They have worse employment conditions, although better than informal positions typical of their parents. Furthermore, we investigate the association between local sociodemographic characteristics and individual social mobility. We find significant territorial heterogeneity associated with differences in better health and education infrastructures, and local economic activity.

Blockchain-enabled architecture for lead acid battery circularity

Widespread use of lead acid batteries (LABs) is resulting in the generation of million tons of battery waste, globally. LAB waste contains critical and hazardous materials, which have detrimental effects on the environment and human health. In recent times, recycling of the LABs has become efficient but the collection of batteries in developing countries is not efficient, which led to the non-professional treatment and recycling of these batteries in the informal sector. This paper proposes a blockchain-enabled architecture for LAB circularity, which ensures authentic, traceable and transparent system for collection and treatment of batteries. The stakeholders—battery manufacturers, distributors, retailers, users, and validators (governments, domain experts, third party experts, etc.)—are integrated in the circular loop through a blockchain network. A mobile application user interface is provided to all the stakeholders for the ease of adoption. The batteries manufactured and supplied in a geographical region as well as the recycled materials at the battery end-of-life are traced authentically. This architecture is expected to be useful for the battery manufacturers to improve their extended producer responsibility and support responsible consumption and production.

Does use of formal and informal credit reduce poverty in rural Mexico?

AbstractMotivationDespite efforts to reduce poverty, both income and multidimensional poverty continue to be high in Mexico, especially in rural areas. Most studies concerned with the effect of credit use on poverty analyse formal credit, but little is known about the impacts of different types of credit on poverty.PurposeWe investigate the impacts of the use of formal credit and informal loans obtained (primarily) for productive and investment purposes on multidimensional and income poverty of rural households in Mexico.Approach and methodsWe use data from the 2013 and 2015 CONEVAL Surveys of Rural Households in Mexico, representative of rural communities with fewer than 2,500 inhabitants, to investigate the impact of credit on poverty. We apply inverse probability of treatment weighting (IPTW) to account for differences between users of formal credit, users of informal loans, and non‐users of credit.FindingsBoth formal and informal credit usage reduce poverty in rural Mexico, generally with clearer impacts on moderate rather than extreme poverty. Informal credit appears to have largely reached households that could most benefit from it. Broader access to formal credit would potentially further reduce poverty.Policy implicationsPublic policies to reduce rural poverty should promote a greater access to the formal financial sector. Including vulnerable low‐income rural households in formal finance should be accompanied by financial education.

Untraded inter‐dependencies as auxiliary production factors for informal artisans in urban industrial clusters: An empirical study in Kumasi, Ghana

AbstractThe concept and influence of untraded inter‐dependencies are under‐explored in the industrial cluster and informal economy literature. In this paper, we attempt to bridge this gap by extending the conventional Cobb‐Douglas production function to operationalising and testing the moderating effects of two forms of untraded inter‐dependencies in informal production. Based on the diffusion theory, we argue that knowledge‐sharing would favour informal production, as opposed to tool‐sharing. Using quantitative methods, 334 informal artisans were randomly sampled from three clusters in the Kumasi Metropolis of Ghana and analysed data obtained with moderating models and simple slopes plots. The tested models and fuzzy set configurations confirmed that knowledge‐sharing, but not tool‐sharing, has significant interaction effects on informal production. The optimal model derived would be one in which capital interacts with incremental knowledge‐sharing at the existing level of tool‐sharing among the artisans. This paper serves as an extension of new economic geography with an additional factor of untraded inter‐dependencies. As part of post‐COVID restoration and enhancement of informal production processes, we recommend city officials to deliberately plan and space clustered enterprises that enable the observed rates of interactions between production factors and untraded inter‐dependencies.

Facilitating the transition to formal economy by means of labor law and social security law

Facilitating the transition to formal economy by means of labor law and social security law

Anatomy of the shadow economy: Structure, dynamics and impact on macroeconomic stability in times of crises

Aim. To test hypotheses about the counter-cyclical nature of the shadow economy and its role as a “shock absorber of social costs”.Objectives. To study the dynamics and structure of the shadow economy and employment during the crises of 2008–2009, 2014–2016 and 2020–2022; to analyze the ability of the shadow economy to absorb unemployment and smooth the fall of the economy; to identify the components of the dynamics of the shadow economy during the crises.Methods. The article is based on the analysis of unobserved economy estimates, microdata of labor force surveys of Rosstat and the Russian Monitoring of Economic Situation and Health of the National Research University Higher School of Economics. The dynamics of shadow gross domestic product (GDP), employment without registration, tax evasion, and unregistered entrepreneurial activity is analyzed. Balance models of workers’ transitions between formal and shadow employment were developed.Results. The data showed that the shadow economy is highly flexible and can temporarily absorb part of the unemployed and gross output in crises. However, its impact on macroeconomic stability is limited. Shadow employment serves as a factor of instability for shadow workers. Three groups of actors that determine the dynamics of the shadow economy are identified: entrenched, outsiders and reactive. The bulk of the shadow economy is concentrated in small and medium-sized businesses.Conclusions. The shadow economy can both contribute to the maintenance of economic activity, employment, and act as a driver of crises. In the author’s opinion, it is necessary to improve state regulation to facilitate legalization of business and employment of the “rooted” segment of the shadow economy.

Hide and Seek: Female Parliamentarians and the Informal Economy

Hide and Seek: Female Parliamentarians and the Informal Economy

Hide and Seek: Female Parliamentarians and the Informal Economy

Hide and Seek: Female Parliamentarians and the Informal Economy

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.

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.

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.

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.

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.