In Search of Inclusion: Informal Sector Participation in a Voluntary,Defined Contribution Pension System

This paper examines who contributes and who persists in contributing in a national, voluntary, defined contributory pension programme, where the government provides the incentive of matching contributions of a minimum amount (USD 16). The paper uses proprietary data from a financial services firm where 12 per cent of customers (37,000 individuals) chose to participate in this programme. The evidence shows that only about 50 per cent of contributors reach the minimum amount for the co-contribution, but that participants persist in contributing even if they failed to contribute the minimum amount in a given year. While this paper does not provide causal estimates, it does present evidence of considerable interest among the informal sector in a state-run voluntary pension programme in an emerging market where access to formal finance is otherwise poor.     

Which Institutions are Good for Your Health? The Deep Determinants of Comparative Cross-country Health Status

We extend the literature on the deep determinants of economic development by focusing on life expectancy, instead of income per capita, as an indicator of economic development, and by examining the role of informal, as well as formal, institutions. Our empirical results suggest that formal and informal institutions are substitutes. Improving informal institutions has positive effects on life expectancy that are statistically significant for most countries and stronger than the effects of improving formal institutions. The gains from improving informal institutions are greatest for countries in which institutions are weakest. Geographical factors also help explain cross-country variation in life expectancy.     

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.     

THE EU AS LAWMAKER: THE IMPACT OF EU DIRECTIVES ON NATIONAL REGULATION IN THE NETHERLANDS

The impact of European directives on Dutch regulation is fairly limited when compared to the claims that are made by academics and politicians. We found that 12.6 per cent of all parliamentary acts, 19.7 per cent of all orders in council, and 10.1 per cent of all valid ministerial decisions were actually rules transposing EU directives. The total overall impact for all three types of legislation was 12.6 per cent. Departments generally employ the same type of rules in similar proportions both when transposing EC directives and when producing national rules. Departmental autonomy is a defining feature of Dutch central government in general, and this pattern persists in the coordination and implementation of EU directives. Nearly 90 per cent of the European directives in The Netherlands are transposed through delegated legislation in which no involvement of parliament is required. If we take into account the fact that the majority of formal laws are actually drafted by the executive and submitted to parliament, we could easily state that virtually all national rules that transpose European directives into the Dutch legal system are drafted by the executive.     

Remittances,Banking Status and the Usage of Insurance Schemes

Empirical evidence that migrants send home more remittances after disasters raises the question of whether remittances are used to self-insure, substituting for both formal and informal insurance. We investigate this question using a unique data set on the usage patterns of financial services by households in South Africa. We show that the likelihood that a respondent has a formal funeral cover increases with income and banking status. However, it is lower for individuals receiving remittances, which supports the idea that remittances act as self-insurance. We also show that other risk management strategies influence the purchasing of formal funeral cover. Finally, we find that determinants of informal insurance differ from those of formal insurance.     

GENDER AND THE HIDDEN LIFE OF INSTITUTIONS

New Institutionalism has shown that the ‘rules of the game’ are crucial to structuring political life in terms of constraining and enabling political actors and influencing political outcomes. A limitation of this approach, however, has been its overemphasis on formal rules, with much less attention paid to how informal rules work alongside and in conjunction with formal institutions to shape actors and outcomes. This article contributes to an emerging literature that highlights the importance of informal institutions by bringing into focus one element that has been hidden in these debates – the influence of gender norms and practices on the operation and interaction between formal and informal institutions. It highlights some of the key benefits of a gender analysis for understanding political institutions in both their formal and informal guise and considers some of the challenges in building a research agenda that requires new methods and techniques of inquiry.     

On the Relationship between Violent Conflict and Wages in Colombia

We analyse how forced displacements caused by violent conflict are related to the wages of workers in Colombia. Using data from the Quality of Life Survey (2011–2014), we analyse the differences in wages between those forced by violence to move to other regions, and those who moved for other reasons. We apply Propensity Score Matching techniques to compare workers from the two groups, finding that forced displacement is related to decreases of between 10 and 29 per cent in the wages of males, and between 18 and 37 per cent in the wages of females, relative to their counterparts. Thus, forced displacements are related to poorer labour market outcomes in terms of wages.     

Rethinking the Effects of Microcredit on Household Welfare in Cambodia

This article analyses the effects of microcredit on household welfare in terms of household expenditure per capita in Cambodia, with data from the Cambodia Socio-Economic Survey carried out in 2014. The analysis describes the effects via formal and informal lending sectors, accounting for endogenous selection bias arising from unobserved factors and for structural differences between borrowers and non-borrowers in terms of expenditure functions. The findings suggest that microcredit in both sectors reduces household expenditure.     

Formal and Informal Social Participation of Public,Non-Profit,and Private Employees

Although existing research has focused on the link between employee sector and formal volunteering, no differentiation is made between formal and informal social participation. This study compares the formal and informal social participation of public-, non-profit-, and private-sector employees using recent data from two sources. The results indicate that both government and non-profit employees report higher levels of formal and informal social participation, as measured in several ways. Findings provide a more complete understanding of the multifaceted ways in which citizens can get involved, and emphasize the importance of motivational differences.     

Expanding Microfinance in Brazil: Credit Utilisation and Performance of Small Firms

We take advantage of the natural experiment generated by the exogenous change in government policy towards microcredit to evaluate the impact of the increased supply of microcredit on the utilisation of credit by micro-entrepreneurs. Based on micro-entrepreneurs' survey and administrative data from a microcredit programme in Brazil, we show that: the increased supply of microcredit raised formal credit utilisation and this does not crowd out the use of informal credit sources; formal credit taking improves business performance; and returns are larger for women- than for men-owned firms, but males employ significantly more workers after taking formal credit than females.     

Double Penalty in Returns to Education: Informality and Educational Mismatch in the Colombian Labour Market

This article examines the returns to education taking into consideration the existence of educational mismatches in the formal and informal employment of a developing country. Results show that the returns of surplus, required and deficit years of schooling are different in the two sectors. Moreover, they suggest that these returns vary along the wage distribution, and that the pattern of variation differs for formal and informal workers. In particular, informal workers face not only lower returns to their education, but suffer a second penalty associated with educational mismatches that puts them at a greater disadvantage compare to their formal counterparts.     

Local Government Finance: Assessing the Central Governmant's Contribution

It is widely believed that between 60 to 66 per cent. of local authority expenditure (or income) is met by grants from central government alone. This popularly held view is challenged in this paper through a consideration of the current system of funding. We begin with the rate support grant procedure and identify some common sources of misunderstanding; these concern the definition of the rate support grant itself and the true nature of relevant expenditure. This leads us to examine the question of local authority miscellaneous income from fees, sales, rents and other sources from which we conclude that its contribution is underestimated. However it is general knowledge that besides miscellaneous income local authorities derive their income from two other principal sources namely, government grants and local rates. Accordingly the remainder of the paper examines in turn the contribution of these three sources towards (i) local authority revenue expenditure in respect of rate fund services, (ii) local authority revenue income and (iii) local authority income including both revenue and capital receipts. In no instance does central government's share approach 60 per cent. Thus, it would appear that the contribution of government is being overestimated while that of miscellaneous income underestimated. The implications of this are discussed.     

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.     

The Best Laid Plans: The Impact of Informal Rules on Formal Institutions in Transitional Regimes

How do informal institutions influence the formation and function of formal institutions? Existing typologies focus on the interaction of informal institutions with an established framework of formal rules that is taken for granted. In transitional settings, such typologies are less helpful, since many formal institutions are in a state of flux. Instead, using examples drawn from post-communist state development, I argue that informal institutions can replace, undermine, and reinforce formal institutions irrespective of the latter’s strength, and that the elite competition generated by informal rules further influences which of these interactions dominate the development of the institutional framework. In transitional settings, the emergence and effectiveness of many formal institutions is endogenous to the informal institutions themselves.     

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.     

Political Corruption and Institutional Stability

This article is the first to statistically examine the reciprocal relationship between formal political institutions and political corruption. We argue that political corruption is an informal institution that allows nondemocratic leaders to build political support, act as a substitute for liberalizing concessions in the formal institutions of the state, and thereby extends the longevity of non-democratic regimes. Yet, whereas high corruption level will prevail in nondemocratic regimes, we expect the electoral constituency in democratic regimes to have the formal power to curb political corruption. We demonstrate that these expectations hold by estimating a dynamic multinomial regression model on data for 133 countries for the 1985–2008 period. Our model shows that high-corruption autocracies and hybrid regimes are more stable than their low-corruption counterparts, but that low-corruption democracies are more stable than high-corruption ones. For autocratic and hybrid regimes, the stability is due both to corruption making the formal institutions more resistant to democratization and that the formal institutions prevent reductions in corruption. Consistent democracies, on the other hand, are able to reduce corruption and become more stable as a result.     

Directed credit and investment in small‐scale industry in India: Evidence from firm‐level data 1965–78

Panel data on 788 modern sector Indian firms during 1965–78 are used to analyse the link between the size of a firm and its financial environment. Exogeneity tests reveal that large firms with improved investment prospects could obtain external finance at the margin, but that small firms could not. The policy of directing bank credit accordingly relaxed a binding constraint on small firms, raising investment. Assuming that all of the rise in the credit‐sales ratio in small firms was policy‐induced then so was about one third of the 170 per cent rise during 1965—78 in their investment—sales ratio.     

Formal and Informal Seed Systems in Kenya: Supporting Indigenous Vegetable Seed Quality

Indigenous vegetables play an important role in Kenyan food security, but production is limited by poor seed quality. Traditionally, seeds have been traded through informal networks, but a new formal seed sector is emerging. This study assessed the relative potential for formal or informal seed systems to meet the need for high-quality indigenous vegetable seed. By evaluating determinants of farmers’ seed purchasing behaviour, we conclude that informal seed systems have greater potential to meet this need and should be strengthened. This study suggests that policy-makers should use context-specific data to guide decisions on seed policy.     

Informal rules! Using institutional economics to understand service provision in Turkey's spontaneous settlements

Turkey's spontaneous settlements (gecekondus) house half the urban population and face infrastructure deficiencies that reduce quality of life and economic productivity while increasing the vulnerability of the urban poor. This article reports on research that used the new institutional economics to examine the formal and informal institutional frameworks for infrastructure provision in gecekondus. In theory, formal rules should create incentives that produce behaviour. However, a key finding was that rules are generally irrelevant. In fact, in the absence of credible formal rules, pressures arise that help shape informal rules which then result in behaviour. This has important implications for both institutional theory and daily practice.     

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.