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Informal Employment and the Role of Regional Governance

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  • Erik Jonasson

Abstract

The aim of this paper is to provide an explanation to why the degree of informal employment may vary substantially between different regions within a country. In Brazil, 45% of workers in the urban labor force are employed informally. The degree of informal employment, however, varies substantially across regions, with some cities having 20% and others having 80% or more of their labor force in the informal sector.The hypothesis assessed here is that the quality of local governance—or government effectiveness—affects the decisions of workers and businesses as to whether to participate in the formal or the informal sector. The empirical analysis, based on data from 5500 Brazilian municipalities, shows that informal employment is lower in regions with better governance, higher average education, and with a relatively large manufacturing sector. Endogeneity concerns are addressed as part of a series of robustness checks of the results.
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  • Erik Jonasson, 2011. "Informal Employment and the Role of Regional Governance," Review of Development Economics, Wiley Blackwell, vol. 15(3), pages 429-441, August.
    • Handle: RePEc:bla:rdevec:v:15:y:2011:i:3:p:429-441
    DOI: j.1467-9361.2011.00618.x
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    Cited by:

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    3. Maiti,Dibyendu & Khari,Bhavna, 2023. "Digitalisation, Governance and the Informal Sector," IDE Discussion Papers 898, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    4. Michael King, 2012. "The Unbanked Four-Fifths: Informality and Barriers to Financial Services in Nigeria," The Institute for International Integration Studies Discussion Paper Series iiisdp411, IIIS.
    5. William Y. N. Suzuki & Marcio P. Laurini & Luciano Nakabashi, 2022. "Spatial heterogeneities, institutions, and income: Evidence for Brazil," Papers in Regional Science, Wiley Blackwell, vol. 101(3), pages 537-571, June.
    6. Luciano Nakabashi & Ana Elisa Pereira, 2023. "Factors of production, productivity, institutions, and development: Evidence from Brazil," Review of Development Economics, Wiley Blackwell, vol. 27(2), pages 1034-1055, May.
    7. del Río, Fernando, 2018. "Governance, social infrastructure and productivity," MPRA Paper 86245, University Library of Munich, Germany, revised 16 Apr 2018.
    8. Garcia-López, Miquel-Àngel & Moreno-Monroy, Ana I., 2018. "Income segregation in monocentric and polycentric cities: Does urban form really matter?," Regional Science and Urban Economics, Elsevier, vol. 71(C), pages 62-79.
    9. Mohamed Amara, 2016. "The linkages between formal and informal employment growth in Tunisia: a spatial simultaneous equations approach," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 56(1), pages 203-227, January.
    10. Boisjoly, Geneviève & Moreno-Monroy, Ana Isabel & El-Geneidy, Ahmed, 2017. "Informality and accessibility to jobs by public transit: Evidence from the São Paulo Metropolitan Region," Journal of Transport Geography, Elsevier, vol. 64(C), pages 89-96.
    11. repec:idq:ictduk:13663 is not listed on IDEAS
    12. Ana Isabel Moreno-Monroy & Frederico Ramos, 2015. "The impact of public transport expansions on informality: the case of the São Paulo Metropolitan Region," ERSA conference papers ersa15p1551, European Regional Science Association.
    13. Pinto, Davi Garcia Lopes & Loureiro, Carlos Felipe Grangeiro & Sousa, Francelino Franco Leite de Matos & Motte-Baumvol, Benjamin, 2023. "The effects of informality on socio-spatial inequalities in accessibility to job opportunities: Evidence from Fortaleza, Brazil," Journal of Transport Geography, Elsevier, vol. 108(C).
    14. Moreno-Monroy, Ana I. & Ramos, Frederico Roman, 2021. "The impact of public transport expansions on informality: The case of the São Paulo Metropolitan Region," Research in Transportation Economics, Elsevier, vol. 88(C).
    15. Fernando del Río, 2021. "The impact of rent seeking on social infrastructure and productivity," Review of Development Economics, Wiley Blackwell, vol. 25(3), pages 1741-1760, August.
    16. Serdar Acun, 2021. "Türkiye’de Ücretlilerin Kayıtlı Çalışma Olasılığını Belirleyen Faktörlerin Analizi," Journal of Social Policy Conferences, Istanbul University, Faculty of Economics, vol. 0(80), pages 423-450, June.
    17. Tran, Tuyen & Vu, Huong, 2013. "Farmland loss, nonfarm diversification and inequality: A micro-econometric analysis of household surveys in Vietnam," MPRA Paper 47596, University Library of Munich, Germany.
    18. Motte, Benjamin & Aguilera, Anne & Bonin, Olivier & Nassi, Carlos D., 2016. "Commuting patterns in the metropolitan region of Rio de Janeiro. What differences between formal and informal jobs?," Journal of Transport Geography, Elsevier, vol. 51(C), pages 59-69.
    19. Quang Tran, Tuyen & Hong Nguyen, Son & Van Vu, Huong & Quoc Nguyen, Viet, 2014. "Determinants of poverty among ethnic minorities in the Northwest region, Vietnam," MPRA Paper 59144, University Library of Munich, Germany, revised 01 Oct 2014.
    20. Kpognon, Koffi D., 2022. "Effect of Natural Resources on the Size of Informal Economy in sub-Saharan Africa: An Empirical Investigation," Structural Change and Economic Dynamics, Elsevier, vol. 63(C), pages 1-14.
    21. Tran Quang, Tuyen, 2014. "Determinants of nonfarm participation among ethnic minorities in the Northwest Mountains, Vietnam," MPRA Paper 59158, University Library of Munich, Germany, revised 08 Oct 2014.

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    More about this item

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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