IDEAS home Printed from https://ideas.repec.org/a/ebl/ecbull/eb-19-01087.html
   My bibliography  Save this article

Informal economy, government intervention and labor market in Algeria: An analysis by structural models

Author

Listed:
  • Kahina Cherfi-Feroukhi

    (CREAD (Applied Eonomy Research Center for Development))

  • Saïd Souam

    (University Paris Nanterre, EconomiX, CREST and CREAD)

Abstract

Literature on the informal economy can mainly be divided into two different contrasting theories. On one hand, the dualists argue that the informal sector is considered to be the lower segment of a dual labor market, with no direct link to the formal economy, which provides income for the poor and a safety net in times of crisis. On the other hand, the legalists argue that hostile government intervention leads to excessive and costly regulation, such as taxes or direct contributions. This drives rent-seeking ï¬ rms towards the informal economy. In this paper, we do consider that these two theories are complementary rather than substitutable. This is why we use structural models (PLS-PM) to deal simultaneously with the role of government intervention and labor market to estimate the informal economy in Algeria for the period 2000-2018. Our results show an upward trend in the informal economy between 2000 and 2009 from 34.1% to 45.86% of GDP, and a global decline until 2018 to 32.83%. Moreover, our findings show the direct responsibility of government intervention in the expansion of the informal economy besides the labor market conditions. It turns out that efforts to absorb the informal economy in Algeria should simultaneously involve variables linked to the labor market and to the government intervention. Finally, we provide an index of the size of the informal economy and compare it to other studies.

Suggested Citation

  • Kahina Cherfi-Feroukhi & Saïd Souam, 2020. "Informal economy, government intervention and labor market in Algeria: An analysis by structural models," Economics Bulletin, AccessEcon, vol. 40(2), pages 1178-1193.
  • Handle: RePEc:ebl:ecbull:eb-19-01087
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/Pubs/EB/2020/Volume40/EB-20-V40-I2-P101.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Giles, David E A, 1999. "Measuring the Hidden Economy: Implications for Econometric Modelling," Economic Journal, Royal Economic Society, vol. 109(456), pages 370-380, June.
    2. Christopher Bajada & Friedrich Schneider, 2005. "The Shadow Economies Of The Asia‐Pacific," Pacific Economic Review, Wiley Blackwell, vol. 10(3), pages 379-401, October.
    3. Abbas Khandan & Masoud Nili, 2014. "Government interventions and the size of the informal economy. The case of Iran (1971-2007)," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 17(1), pages 71-90, March.
    4. repec:bla:germec:v:11:y:2010:i::p:109-149 is not listed on IDEAS
    5. Feld Lars P. & Schneider Friedrich, 2010. "Survey on the Shadow Economy and Undeclared Earnings in OECD Countries," German Economic Review, De Gruyter, vol. 11(2), pages 109-149, May.
    6. Contini, Bruno B, 1981. "Labor Market Segmentation and the Development of the Parallel Economy-The Italian Experience," Oxford Economic Papers, Oxford University Press, vol. 33(3), pages 401-412, November.
    7. Jakobowicz, Emmanuel & Derquenne, Christian, 2007. "A modified PLS path modeling algorithm handling reflective categorical variables and a new model building strategy," Computational Statistics & Data Analysis, Elsevier, vol. 51(8), pages 3666-3678, May.
    8. Philippe ADAIR & Youghourta BELLACHE, 2012. "Emploi Et Secteur Informels En Algérie : Déterminants, Segmentation Et Mobilité De La Main-D’Œuvre," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 35, pages 121-149.
    9. Trevor Breusch, 2005. "Estimating the Underground Economy using MIMIC Models," Econometrics 0507003, University Library of Munich, Germany, revised 15 Dec 2005.
    10. Abbas Khandan & Masoud Nili, 2014. "Government interventions and the size of the informal economy. The case of Iran (1971–2007)," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 17(1), pages 71-90, January.
    11. Bruno Frey & Friedrich Schneider, 2000. "Informal and underground economy," Economics working papers 2000-04, Department of Economics, Johannes Kepler University Linz, Austria.
    12. Schneider, Friedrich G., 2007. "Shadow Economies and Corruption All Over the World: New Estimates for 145 Countries," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 1, pages 1-66.
    13. Schneider Friedrich & Buehn Andreas, 2017. "Shadow Economy: Estimation Methods, Problems, Results and Open questions," Open Economics, De Gruyter, vol. 1(1), pages 1-29, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Schneider Friedrich & Buehn Andreas, 2017. "Shadow Economy: Estimation Methods, Problems, Results and Open questions," Open Economics, De Gruyter, vol. 1(1), pages 1-29, March.
    2. Colin C. Williams & Friedrich Schneider, 2016. "Measuring the Global Shadow Economy," Books, Edward Elgar Publishing, number 16551.
    3. Faeyz M. J. Abuamria, 2019. "The Effect of Deterrence Factors on Discourage Shadow Economy Level and Tax Evasion," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 9(1), pages 65-70, January.
    4. Feige, Edgar L., 2015. "Reflections on the meaning and measurement of Unobserved Economies: What do we really know about the “Shadow Economy”?," MPRA Paper 68466, University Library of Munich, Germany.
    5. Friedrich SCHNEIDER, 2016. "Estimating the Size of the Shadow Economy: Methods, Problems and Open Questions," Turkish Economic Review, KSP Journals, vol. 3(2), pages 256-280, June.
    6. Cong Minh Huynh & Tan Loi Nguyen, 2020. "Fiscal policy and shadow economy in Asian developing countries: does corruption matter?," Empirical Economics, Springer, vol. 59(4), pages 1745-1761, October.
    7. Lars P. Feld & Friedrich Schneider, 2011. "Survey on the Shadow Economy and Undeclared Work in OECD Countries," Chapters, in: Friedrich Schneider (ed.), Handbook on the Shadow Economy, chapter 2, Edward Elgar Publishing.
    8. Schneider, Friedrich, 2014. "The Shadow Economy and Shadow Labor Force: A Survey of Recent Developments," IZA Discussion Papers 8278, Institute of Labor Economics (IZA).
    9. Nino Kokashvili & Irakli Barbakadze & Ketevani Kapanadze, 2017. "How Participating In The Shadow Economy Affects The Growth Of Latvian Firms," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 101, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    10. Gemmell, Norman & Hasseldine, John, 2012. "The Tax Gap: A Methodological Review," Working Paper Series 18717, Victoria University of Wellington, Chair in Public Finance.
    11. Friedrich Schneider & Andreas Buehn & Claudio E. Montenegro, 2011. "Shadow Economies All Over the World: New Estimates for 162 Countries from 1999 to 2007," Chapters, in: Friedrich Schneider (ed.), Handbook on the Shadow Economy, chapter 1, Edward Elgar Publishing.
    12. Ceyhun Elgin & Friedrich Schneider, 2016. "Shadow Economies in OECD Countries: DGE vs. MIMIC Approaches," Bogazici Journal, Review of Social, Economic and Administrative Studies, Bogazici University, Department of Economics, vol. 30(1), pages 51-75.
    13. Friedrich Schneider & Friedrich Schneider, 2008. "Shadow Economies and Corruption all over the World: What do we Really Know?," Chapters, in: Michael Pickhardt & Edward Shinnick (ed.), The Shadow Economy, Corruption and Governance, chapter 7, pages 122-187, Edward Elgar Publishing.
    14. Gemmell, Norman & Hasseldine, John, 2012. "The Tax Gap: A Methodological Review," Working Paper Series 2435, Victoria University of Wellington, Chair in Public Finance.
    15. Donal Mac Géidigh & Friedrich Schneider & Matthias Blum, 2016. "Grey Matters: Charting the Development of the Shadow Economy," CESifo Working Paper Series 6234, CESifo.
    16. Michael Pickhardt & Jordi Sarda, 2011. "The size of the underground economy in Germany: a correction of the record and new evidence from the modified-cash-deposit-ratio approach," European Journal of Law and Economics, Springer, vol. 32(1), pages 143-163, August.
    17. Piotr Dybka & Michał Kowalczuk & Bartosz Olesiński & Andrzej Torój & Marek Rozkrut, 2019. "Currency demand and MIMIC models: towards a structured hybrid method of measuring the shadow economy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(1), pages 4-40, February.
    18. Dagmara Nikulin & Ewa Lechman, 2021. "Shadow Economy in Poland: Results of the Survey," SpringerBriefs in Economics, in: Shadow Economy in Poland, chapter 0, pages 49-65, Springer.
    19. Branimir Jovanovic, 2015. "Kalman Filter Estimation of the Unrecorded Economy in Macedonia," Working Papers 2015-02, National Bank of the Republic of North Macedonia.
    20. repec:ces:ifodic:v:14:y:2017:i:4:p:19267788 is not listed on IDEAS
    21. Friedrich Schneider, 2012. "The Shadow Economy and Tax Evasion: What Do We (Not) Know?," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(02), pages 03-12, July.

    More about this item

    Keywords

    Informal economy; Government intervention; Labor market; PLS-PM model; Algeria.;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • J4 - Labor and Demographic Economics - - Particular Labor Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-19-01087. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: John P. Conley (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.