Changes in earnings inequality and labour market segmentation: Metropolitan Santiago 1969–78

Changes in earnings inequality are examined in this article through an eclectic approach allowing for differences in human capital earnings function by labour market segments. Several findings are of interest. The first are the components of earnings inequality changes, these being, in order of importance: changes in the within segments inequality, changes in the relative share of the informal sector segment, and changes in relative income between segments. Second, these changes are found to be the result of labour market liberalisation policies such as abolition of both minimum wages and labour turnover legislation in the formal sector, the promotion of self‐employed activities in the informal sector, and, the selective mobility pattern between segments.     

Wage determination in Brazil: The growth of union bargaining power and informal employment

This article examines wage determination in Brazilian manufacturing during the 1980s and early 1990s. It presents evidence to show that the reduction in state regulation of collective bargaining has led to the development of a system of wage determination which is increasingly characterised by rent sharing and insider trade union bargaining power. Real wages appear increasingly inflexible with respect to movements in open unemployment, with a large informal sector disciplining formal sector wage bargaining and cushioning the impact of broader labour market conditions. An important consequence of this is that the employment costs of a successful counter‐inflationary strategy may be very severe.     

Who Suffers the Penalty?: A Panel Data Analysis of Earnings Gaps in Vietnam

In spite of its predominant economic weight in developing countries, little is known about the informal sector earnings structure compared to that of the formal sector. Taking advantage of the rich VHLSS dataset in Vietnam, in particular its three wave panel data (2002, 2004, 2006), we assess the magnitude of various formal–informal earnings gaps while addressing heterogeneity at three different levels: the worker, the job (wage employment vs. self-employment) and the earnings distribution. We estimate fixed effects and quantile regressions to control for unobserved individual characteristics. Our results suggest that the informal sector earnings gap highly depends on the workers’ job status and on their relative position in the earnings distribution. Penalties may in some cases turn into premiums. By comparing our results with studies in other developing countries, we draw conclusions highlighting Vietnam’s labour market specificity.     

Adjustment,stabilisation and the structure of employment in Brazil

A significant change in the structure of employment in Brazil in the period 1988–95 took place. Industrial employment fell, especially in the most traditional sectors such as clothing, textiles and footwear. There has been a shift of workers from the industrial sector to the services sector and an increase in the share of self‐employed workers and informal wage earners. The quality of jobs being created in the services sector are not of the same ‘quality’ as those in the industrial sector, leading to a deterioration of employment conditions and of the labour market performance. Hence the rate of unemployment is not a very good measure of labour market conditions during adjustment. The creation of jobs in general might therefore not be an explicit target under adjustment. Rather the objective should be trying to change labour market institutions in order to improve the quality of the jobs and the quality of the labour relations.     

Structural reform,institutions and earnings: Evidence from the formal and informal sectors in urban Peru

Reforms undertaken in Peru in the early 1990s might have resulted in a slight reduction of the informal sector. Costs associated with becoming and staying informal, and benefits of becoming formal might have increased. This, when a legalistic definition of informality is used. Earnings differentials between formal and informal self‐employed workers are negligible although they persist between formal and informal salaried workers. Skilled workers are more likely to be found in the formal sector and informal wage earners tend to be younger and less skilled. The earnings generating process for both the formal and the informal self‐employed workers is similar.     

Women's urban labour market status in developing countries: How well do they fare in Khartoum,Sudan?

This article examines the insertion of women in the formal sector labour market in urban Khartoum, Sudan, in order to explain their inferior employment status in one particular developing country environment. A number of hypotheses are tested drawing upon recent labour market theoretical developments and econometric techniques from the literature which have had limited previous applications in Third World settings, particularly in Africa. Our findings indicate that occupational segregation, rather than pay discrimination, is primarily to blame for observed wage differentials suggesting that well‐intentioned equal pay laws will do little to reduce the earnings gap.     

The labour market in a dual economy: Another look at colonial Rhodesia

A labour market model is developed for the formal sector of a labour surplus economy, allowing for monopsony power by firm owners and an inelastic supply of labour with respect to the wage rate. This inelasticity arises even though the wage rate in the traditional sector may be ‘fixed’ due to surplus land, and the supply of labour to the traditional sector responds quite positively to an exogenous increase in the (implicit) wage rate there. This labour supply function is derived from a simple utility maximisation model incorporating the spatial aspects of temporary migration to the formal sector.     

Informal Employment in Developing Economies: Multiple Heterogeneity

This paper contributes to the literature on the nature of informal employment in developing economies. Drawing on the model with essential heterogeneity, it offers a list of scenarios describing the behavioural patterns which informal workers follow. The list nests not only classical patterns of a rationed formal sector versus an integrated labour market, but also different patterns of rationing. Using non-parametric techniques and data from a few African economies with different levels of development, the paper proposes empirical case studies fitting various informality schemes. Developing economies show disparate patterns of allocation of workers and various patterns of rationing.     

Active Labour Market Programmes in Latin America and the Caribbean: Evidence from a Meta-Analysis

We present a systematic review and meta-analysis of impact evaluations of active labour market programmes (ALMPs) in Latin America and the Caribbean (LAC). We extract 296 impact estimates from 51 programme evaluations to analyse the effects of participation on employment, earnings, hours worked, and formality. Our analysis finds that the probabilities of being employed and in formal employment are the labour market indicators most likely to be positively affected by ALMPs in LAC. Moreover, ALMPs are more successful among women and youth and when they are implemented during periods of economic expansion. Training programmes increase both formal employment and earnings; training is particularly effective when it is more intensive and when explicitly targeting poor individuals.     

Maquiladoras and market mamas: Women's work and childcare in Guatemala City and Accra

Abstract

This paper analyses work, childcare, and earnings of mothers in the slums of Guatemala City and Accra. Similar factors affect decisions to work and to use formal daycare, but the importance of childcare varies with the role of the formal labour sector. In Guatemala, where formal sector work is important, higher prices for informal care increase formal daycare use. However, daycare prices and proximity to daycare centers do not significantly affect earnings in Guatemala City and Accra, respectively. Providing formal daycare may be more important to mothers' decision to work in cities where formal sector work dominates.     

Pakistan's informal sector

This study reviews the main features of Pakistan's informal sector. The data on the informal sector, compiled from censuses and sample surveys in one major city (Rawalpindi), suggest that both real wages and employment have grown in the informal sector. The seeming paradox of real wage growth in a labor surplus economy is explained by real wage growth in both agriculture and large‐scale manufacturing, both of which were made possible by Pakistan's growth performance during the 1960s. The differences in wages between the formal and informal sector, after adjusting for age and education, are quite small, a reflection of high labor mobility between the two sectors.     

The Formal Divide: Customary Rights and the Allocation of Credit to Agriculture in Tanzania

It is generally held that one mechanism to enable inclusive growth in Tanzania is enabling farmers to access credit to raise productivity and incomes. The formalisation of property rights in Tanzania is being undertaken by a multiplicity of actors at great expense to donors, individuals and the government. While there have been a variety of different justifications for allocating Certificates of Customary Rights of Occupancy (CCROs) to farmers in Tanzania, perhaps the most prominent argument is that it will enable farmers to finally overcome the divide between ‘informal’ customary rights and the formal banking sector. CCROs would provide the collateral that would induce banks to lend money to small-scale farmers. As part of a six-year investigation in Manyara, Mbeya and Dodoma regions, our research team evaluated the impact of formalisation on farmers’ access to credit. The paper will present the results while pointing to the continuing institutional and market imperfections that perpetuate the formal divide.     

Formal institutions,informal institutions,and red tape: A comparative study

Firms across the globe are affected by red tape, but there is little academic research on how country‐level institutions shape red tape perceptions. Drawing on institutional theory, we argue that a variety of formal and informal country‐level institutions affect perceptions of red tape in the private sector. We test our hypotheses using six data sources, including the World Economic Forum and the World Bank. Our results indicate that red tape is weakly associated with a country's level of formalization and rule enforcement effectiveness and more prevalent in federal as opposed to unitary states. As for informal institutions, we find that red tape perceptions are more pronounced in countries with an increased conservative political ideology, higher levels of corruption, and cultures that emphasize individualism and uncertainty avoidance. We conclude with a discussion of the implications for theory and practice.     

Limits of regulatory governance change in the post-developmental state: Korean telecommunications market restructurings from a comparative perspective

This study explains the limits of institutional transformation in Korea from the developmental state to a post-developmental state, in terms of regulatory institutions instead of developmental institutions. The Korean state has taken advantage of the government's discretionary policy changes and power formed by both informal state institutions and informal policy networks, while the regulatory state has placed a special emphasis on social consensus as well as political support for changes of market institutions. New market rules and laws have also been inefficient and ineffective for fair market competition. Limits of regulatory governance change have occurred due to misalignments between informal regulatory institutions in the developmental state and formal regulatory institutions in the post-developmental state. State managers have created discretionary state intervention in policy implementation, politicized the roles of regulatory agencies, and brought ministry-type regulatory state institutions back in. The establishment of effective market institutions has failed due to informal market institutions (unfair and illegal market practices) that have interfered with the policy implementation of new formal market regulations.     

Do Changes in the Labour Market Take Families Out of Poverty? Determinants of Exiting Poverty in Brazilian Metropolitan Regions

Abstract

Using survival models, we test whether short-term changes in the labour market affect poverty duration. Data are from the Brazilian Monthly Employment Survey. Such a monthly dataset permits more accurate estimations of events than using annual data, but its panel follows households for a short period. Then methods that control for both right- and left-censoring should be used. The results are as follows: households with zero income are not those with the lowest chances of exiting; changes in aggregate unemployment do not affect poverty duration; and increasing wages in the informal sector has a negative effect on poverty duration.     

Street‐level bureaucrats,rule‐following and tenure: How assessment tools are used at the front line of the public sector

Studies on street‐level bureaucracy examine actions of frontline workers within the public sector. In this literature, there is a lack of evidence on how job tenure affects how frontline workers respond to formal steering. We contribute to prior research by studying the nationwide introduction of an assessment support tool to be used by caseworkers to assess clients’ needs under the Swedish active labour market policy. We examine the potential effects of tenure on how caseworkers use this tool. The empirical analysis is based on quantitative and qualitative data. We show that as tenure increases, street‐level bureaucrats, especially male caseworkers, tend to act in accordance with policy signals to a lesser extent. The qualitative analysis shows that this pattern can partly be explained by the fact that increasing experience with meeting clients face to face increases caseworkers’ perceived confidence and skills.     

Impact of Shocks on Labour and Schooling Outcomes and the Role of Public Work Programmes in Rural India

The effectiveness of the National Rural Employment Guarantee Scheme (NREGS) on rural labour market dynamics in India has been widely debated in the literature. However, the impact of the NREGS on non-agricultural labour market and children schooling outcomes in reference to exogenous rainfall shock is unclear from the existing literature. This paper exploits the Indian National Sample Survey and rainfall measures from the precipitation archive of the University of Delaware to investigate the role of the NREGS in the labour market and schooling outcomes of children during shocks. Using a difference-in-differences methodology, we focus on disaggregated shock specification and find a shock-cushioning pattern for the NREGS during negative shocks. However, there is an excess demand for labour during positive shock periods resulting from exposure to the NREGS. The implication is that the excess informal labour market opportunity translates to a reduction in school engagement for children. These findings summarily distinguish the role of the NREGS during positive and negative shocks respectively.     

Agricultural Workers,Credit Rationing and Family Networks in Rural Mexico

Abstract

We use mixed methods and first-hand household data in Mexico to investigate credit practices by households engaged in agricultural wage employment. Quantitative analysis shows evidence of rationing in the formal sector but also suggests the existence of mitigating mechanisms. Qualitative analysis provides additional insights. First, income patterns associated with agricultural wage generate income smoothing needs that are sometimes better met by the informal sector. Second, family networks can perform key functions as gateways to the formal sector, through specific informal arrangements that inject flexibility into formal rules and procedures.     

Informal socialization in public organizations: Exploring the impact of informal socialization on enforcement behaviour of Dutch veterinary inspectors

Organizations try to socialize employees' behaviour through formal practices such as training programmes and selection procedures. This article focuses on how times of informal socialization, outside the organization's direct sphere of influence, impact the behaviour of employees. The research is based on data from 67 semi‐structured interviews with Dutch veterinary inspectors in a cross‐sectional and a longitudinal panel. Their work is characterized by intensive and at times adverse contact with inspectees, yet limited interaction with their colleagues. The results show that informal socialization has an important impact on the organizational socialization of inspectors, and provides further insights into the dynamic interplay between formal socialization practices and informal socialization. In addition, the research provides empirical evidence for the role of emotional processes in organizational socialization.     

Factors impeding credit use in small‐farm households in Bolivia

Sample survey data show few Bolivian small‐farm households using credit, but most would like to borrow from formal market institutions. A theoretical framework is developed to formulate testable hypotheses to identify factors that inhibit credit use. Major impediments to borrowing are scale of operations, as measured by amount of useable land, and borrower's transactions costs that arise from loan paperwork, use of Indian language, remoteness from market, little education and low degree of market integration. When farmers with these characteristics borrow they tend to use informal market sources because of the lower transactions costs compared to those of formal market lenders. The policy implication is if formal market lenders are to reach more farmers they must lower transactions costs.