Tuesday, August 31, 2004

[IWS] IADB: Inequality, Institutions, and Informality [September 2004]

IWS Documented News Service
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Institute for Workplace Studies                 Professor Samuel B. Bacharach
School of Industrial & Labor Relations          Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor                  Stuart Basefsky
New York, NY 10016                      Director, IWS News Bureau
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Inter-American Development Bank (IADB)
Research Department Working Paper

Inequality, Institutions, and Informality
http://www.iadb.org/res/publications/pubfiles/pubWP-516.pdf
[full-text, 29 pages]
Chong, Alberto; Gradstein, Mark
WP-516
September 2004

Abstract:
This paper presents theory and evidence on the determinants of the size of the informal sector. We propose a simple theoretical model in which the informal sectors size is negatively related to institutional quality and positively related to income inequality. These predictions are then empirically validated using different proxies of the size of the informal sector, income inequality, and institutional quality.  The results are shown to be robust with respect to a variety of econometric specifications.
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Director, IWS News Bureau               *
Institute for Workplace Studies *
Cornell/ILR School                      *
16 E. 34th Street, 4th Floor            *
New York, NY 10016                      *
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