| Title: |
Do public-sector employment reductions promote the informal economy? |
| Authors: |
Adam, Antonis; Moutos, Thomas |
| Source: |
Journal of Institutional Economics ; volume 20 ; ISSN 1744-1374 1744-1382 |
| Publisher Information: |
Cambridge University Press (CUP) |
| Publication Year: |
2024 |
| Description: |
Using information from all International Monetary Fund conditionality programmes from 1990 to 2018, we implement a dynamic Augmented Inverse Probability Weighting Regression Adjustment approach to enquire whether public-sector employment retrenchment may be incompatible with the goal of shrinking the informal economy. The estimated effect 5 years after the policy intervention indicates an increase in the share of the shadow economy to GDP by about 1.3 percentage points. More importantly, this change involves a sizable reallocation of private economic activity from its formal to its informal part; that is, the size of the formal private sector relative to the size of the informal sector decreases by seven percentage points. We interpret these findings through a two-sector model in which there is interdependence between worker incomes and the allocation of product demand across the formal and informal sectors. |
| Document Type: |
article in journal/newspaper |
| Language: |
English |
| DOI: |
10.1017/s174413742400033x |
| Availability: |
https://doi.org/10.1017/s174413742400033x; https://www.cambridge.org/core/services/aop-cambridge-core/content/view/S174413742400033X |
| Rights: |
https://creativecommons.org/licenses/by/4.0/ |
| Accession Number: |
edsbas.957B8AFA |
| Database: |
BASE |