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Does the informal sector thrive under democracy or autocracy? the case of Nepal

Author

Listed:
  • Offiong Helen Solomon

    (De Montfort University, UK)

  • Sibhaa Shrestha

    (London Metropolitan University, UK)

Abstract

Our paper investigates the size and development of the informal sector in Nepal using aggregate data over the period 1991 to 2009. Our estimation using the Multiple Indicator Multiple Cause (MIMIC) model shows that the average size of the informal sector has been about 44%. Nepal has been classified as having a hybrid political regime, so we show the effect that autocracy and democracy has had on the growth of the informal sector. Our results shows that a high degree of autocracy reduced the size of the informal sector by about 2% while greater direct democracy reduced the informal sector by about 10%.

Suggested Citation

  • Offiong Helen Solomon & Sibhaa Shrestha, 2014. "Does the informal sector thrive under democracy or autocracy? the case of Nepal," Journal of Developing Areas, Tennessee State University, College of Business, vol. 48(3), pages 245-267, July-Sept.
    • Handle: RePEc:jda:journl:vol.48:year:2014:issue3:pp:245-267
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    References listed on IDEAS

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    1. Kjell Hausken & Christian W. Martin & Thomas Plümper, 2004. "Government Spending and Taxation in Democracies and Autocracies," Constitutional Political Economy, Springer, vol. 15(3), pages 239-259, September.
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    Cited by:

    1. Mai Hassan & Friedrich Schneider, 2016. "Modelling the Egyptian Shadow Economy: A Currency Demand and A MIMIC Model Approach," CESifo Working Paper Series 5727, CESifo.
    2. Mai HASSAN & Friedrich SCHNEIDER, 2016. "Modelling the Egyptian Shadow Economy: A MIMIC model and A Currency Demand approach," Journal of Economics and Political Economy, KSP Journals, vol. 3(2), pages 309-339, June.

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    More about this item

    Keywords

    Autocracy; Democracy; Informal Sector; MIMIC; Nepal;
    All these keywords.

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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