Informality in the Process of Development and Growth

Loayza, Norman V.

World Bank, Washington, DC

关键词: informality;    minimum wage;    labor costs;    economic growth;    migration;   

DOI  :  10.1596/1813-9450-7858
RP-ID  :  WPS7858

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

"Informality" is a term usedto describe the collection of firms, workers, and activitiesthat operate outside the legal and regulatory systems. It iswidespread in the majority of developing countries--in atypical developing economy, the informal sector producesabout 35 percent of gross domestic product and employs 70percent of the labor force. This paper studies informalityin the context of economic development by presenting a modeland projections that link informality, regulations,migration, and economic growth. This analytical frameworkhighlights the trade-offs between formality and informality,the relationship between the different types of informality,and the connection between them and the forces of labor,capital, and productivity growth. The paper models thebehavior of the informal sector based on the followingfundamental asymmetry: formal firms confront higher laborcosts while informal firms face higher capital costs andlower productivity. Using mandated minimum wages as thepolicy-induced distortion, the model first studies thestatic allocation of formal and informal capital and laborin a modern economy. Second, it opens the possibility oflabor migration from a rudimentary economy with an amplesupply of labor (rural areas or less advanced neighboringcountries). Third, the model analyzes the dynamic behaviorof the formal and informal sectors, considering how theyaffect and are affected by economic growth and labormigration. Then, the paper presents projections for the sizeof labor informality, in the modern and rudimentaryeconomies, in the next two decades for a large group ofcountries representing all regions of the world. Theprojections are based on the calibration and simulation ofthe model and serve to discuss its usefulness and limitations.