Year: 2016
Type: article
Abstract: In this paper we empirically explore the impact of the presence of informal economies on long-run economic growth. Using a novel panel dataset of 161 countries over the period from 1950 to 2010 we obtain an inverted-U relationship between informal sector size and growth of GDP per capita. That is, small and large sizes of the informal economy are associated with little growth and medium levels of the size of the informal economy are associated with higher levels of growth. We also observe that in high (low) income economies, informal economy size is positively (negatively) correlated with growth. Moreover, when we decompose growth into several components using a simple growth accounting framework, we find that informality is mainly associated with growth in TFP and that this association is different in high and low-income economies.
Source: Journal of Applied Economics
Authors: Ceyhun Elgin, Serdar Birinci
Institutions: Boğaziçi University, University of Minnesota
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: bronze
OpenAlex ID: W2515441985