TAX RATES,GOVERNANCE, AND THE INFORMAL ECONOMY IN HIGH‐INCOME COUNTRIES

Approximately 16.7% of output in high‐income OECD (Organisation for Economic Cooperation and Development) countries is produced informally. I present a model economy where entrepreneurs decide how much of their production to keep informal. Informality carries a risk of getting caught, taxed, and fined. Results from a model with differences in tax rates alone only agree to approximately 23% with data on informality. Taking into account both governance quality and tax rates, agreement between the model's results and data increases to 72%. A policy experiment raising governance quality in Greece, Italy, Spain, and Portugal to Finnish standards reduces informality by 13 percentage points. (JEL E26, H26, J24)     

INFORMAL LABOR MARKETS AND ON‐THE‐JOB TRAINING: EVIDENCE FROM WAGE DATA

This study examines whether informal sector jobs are a source of training for young less‐educated workers. Controlling for worker and job characteristics, it is found that, in the early years of workers' careers in Mexico, wage growth in the informal sector is higher than in the formal sector. This result is consistent with general human capital investment on‐the‐job if the informal labor market is more competitive than the formal labor market due to frictions generated by labor regulations. (JEL O17, J24, J310)     

Reshaping the social contract: emerging relations between the state and informal labor in India

As states grapple with the forces of liberalization and globalization, they are increasingly pulling back on earlier levels of welfare provision and rhetoric. This article examines how the eclipsing role of the state in labor protection has affected state–labor relations. In particular, it analyzes collective action strategies among India’s growing mass of informally employed workers, who do not receive secure wages or benefits from either the state or their employer. In response to the recent changes in state policies, I find that informal workers have had to alter their organizing strategies in ways that are reshaping the social contract between state and labor. Rather than demanding employers for workers’ benefits, they are making direct demands on the state for welfare benefits. To attain state attention, informal workers are using the rhetoric of citizenship rights to offer their unregulated labor and political support in return for state recognition of their work. Such recognition bestows informal workers with a degree of social legitimacy, thereby dignifying their discontent and bolstering their status as claim makers in their society. These findings offer a reformulated model of state–labor relations that focuses attention on the qualitative, rather than quantitative, nature of the nexus; encompasses a dynamic and inter-dependent conceptualization of state and labor; and accommodates the creative and diverse strategies of industrial relations being forged in the contemporary era.

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Mexican Migration for Dummies: What Social Workers and the Public Need to Know

SUMMARY

Amid the derisive, post-911 political debate about border control, national security, and “illegal aliens,” nobody, not even immigrant advocates and protesters, is articulating the macro-level, global economic root cause of undocumented labor migration to America. In simple terms, this essay describes how the contradictory policies of an open border for trade (i.e., NAFTA) and a closed border for immigration result in a predictable undocumented migration bridge between the U.S. and Mexico that must be sensibly regulated for the good of neighboring countries that now share formally integrated economies, yet informally integrated populations. Implications for policy and immigrant serving social workers and other human service providers are discussed.     

Out of the shadows: Classifying economies by the extent and nature of employment in the informal economy

Given the prevalence of informality, this article proposes a typology for classifying countries by the extent and nature of employment in the informal economy, rather than by the composition of their formal economies. The author analyses ILO data on employment in the informal economy in 36 developing countries, and shows that there is a significant correlation between cross‐national variations in the degree and intensity of informalization and cross‐national variations in social and economic indicators such as levels of GNP per capita, corruption, poverty, taxation and social contributions. The article concludes by discussing implications for theory and policy.     

Gender Differences in Formal and Informal Volunteering in Germany

In this study, we examine the gender differences in formal and informal volunteering using data from a Time Use Survey in Germany. Our study finds strong evidence that women are more likely to volunteer formally if they also volunteer informally, suggesting that the decisions are complementary. However, for men the decisions to volunteer formally and informally are not significantly related. Moreover, we find that gender differences in labour force participation cannot explain our results.     

SHOULD I STAY OR SHOULD I GO? CAREER CHOICES FOR YOUNG WORKERS IN LATIN AMERICA

This paper presents the first estimates of the returns to formal labor market experience and tenure in a developing country context. We take advantage of rich matched employer–employee data from Brazil and Chile, exploiting job displacement as a source of identification. We find positive returns to both dimensions in these countries, with larger returns to tenure in Brazil and larger returns to experience in Chile. Our findings suggest the more rigid Brazilian labor legislation may encourage firms to invest in young workers' specific skills. Chile's institutions, on the contrary, might promote the acquisition of general skills. (JEL J24, J31, M50)     

ON GENDER GAPS AND SELF‐FULFILLING EXPECTATIONS: ALTERNATIVE IMPLICATIONS OF PAID‐FOR TRAINING

This paper presents a model of self‐fulfilling expectations by firms and households which generates multiplicity of equilibria in pay and housework time allocation for ex‐ante identical spouses. Multiplicity arises from statistical discrimination exerted by firms in the provision of paid‐for training to workers, rather than from incentive problems in the labor market. Employers' beliefs about differences in spouses' reactions to housework shocks lead to symmetric (ungendered) and asymmetric (gendered) equilibria. We find that: (1) the ungendered equilibrium tends to prevail as aggregate productivity in the economy increases (regardless of the generosity of family aid policies), (2) the ungendered equilibrium could yield higher welfare under some scenarios, and (3) gender‐neutral job subsidies are more effective that gender‐targeted ones in removing the gendered equilibrium. (JEL J16, J70, J71)     

The use of informal networks in Italy: Efficiency or favoritism?

A large body of literature considers the advantages of using informal networks to match workers to jobs. However, family ties may interfere with a genuine process of worker selection, favoring people with connections over more talented workers. We offer a simple model of favoritism to explain these risks and show firms’ trade-off in using informal channels. We then investigate empirically the determinants and consequences of using informal networks in Italy by using the Bank of Italy Survey. We find that informal networks tend to be used by low-educated individuals, in small firms, in low-productivity jobs and in less developed regions. Finally, we show that informal networks have a negative impact on wages, controlling for individual and firm characteristics.     

Transnational regimes of labor and statelessness: Intersections of citizenship regimes and local norms in East and Southeast Asia

This article offers a review of the literature on transnational labor regimes and statelessness to pursue further theorization from East and Southeast Asian contexts. The main focus is on how local norms (local sense of belonging, local moral code, and local hierarchies) are entangled with national‐level citizenship regimes to legitimate the discrimination of certain people to be statelessness and secure low‐wage migrant workers for the new global labor regime. First, traditional literature on citizenship and statelessness was reviewed; binary theoretical frameworks (including citizens/excluding non‐citizens) based on political recognition were indicated as the main limitations. Second, recent theories arguing for an intersection between national citizenship regimes and a new global labor regime were reviewed. Third, recent theories that illuminate the importance of local contexts in determining citizens' rights were reviewed based on formal exclusion and informal inclusion as well as formal inclusion and informal exclusion. Finally, it was concluded that further theorization is needed on how citizenship regimes and local norms intersect to produce statelessness, securing low‐wage migrant workers for the global labor regime through the global assemblages approach. Through the paper, East and Southeast Asia were illuminated as potentially fruitful research sites for further theorization on the topic.     

PAYING MORE TO HIRE THE BEST? FOREIGN FIRMS,WAGES, AND WORKER MOBILITY

In the context of the debate on the labor‐market consequences of globalization, we adopt an original approach toward the identification of the wage differences between foreign and domestic firms: worker mobility. Using matched employer‐employee panel data for Portugal, we consider virtually all spells of interfirm mobility over a period of 10 yr. We find that foreign firms offer significantly more generous wage policies, although there is also a (smaller) selection effect. The results are robust to the consideration of displaced workers, wage growth differences in the new firms, and different subsets of workers. (JEL J31, J63, F23)     

BACK-LOADED WAGES AND ON-THE-JOB TRAINING IN A FRICTIONAL LABOR MARKET

This paper analyzes the coexistence of on-the-job (general) training and on-the-job search in a frictional labor market where firms post skill-dependent labor contracts to preemptively back-load compensation after training. The back-loaded compensation scheme discourages trained workers' efficient job-to-job transition, as if they accumulated relationship-specific capital, which induces overintensified training among more productive firms. The quantitative analysis predicts that the market equilibrium, relative to the efficiency benchmark, gets more skilled workers (training inefficiency) and less output (allocation inefficiency). It further demonstrates that efficiency loss is moderate due to positive externality and can be improved, as search friction is mitigated. (JEL J24, J31, J64)     

Conceptualising informal institutions: Drawing on the case of guanxi

Institutions regulate social life through formal rules and sanctions. These are distinguished from another source of social regulation, the informal incentives and constraints inherent in cultural currents and customary practices. Informal practices may be based not simply on cultural forces, though, but expectations regularised by informal rules and sanctions, which may operate as informal institutions. One approach holds that informal institutions arise out of formal institutional voids. Another holds that informal institutions operate in response to situations in which formal institutions frustrate the interests of individuals and groups who engage informal institutions to augment, compromise, or subvert formal institutions. After developing the concept of informal institution, the article goes on to indicate how an informal relationship pervasive in modern China, guanxi, may be understood as an informal institution. It is shown that by drawing on the case of guanxi the scope of the concept informal institution can be extended and also that our understanding of guanxi is enriched when the concept of informal institution is applied to its analysis.     

LABOR CONTRACTS AND FLEXIBILITY: EVIDENCE FROM A LABOR MARKET REFORM IN SPAIN

This paper evaluates the effects of a labor market reform in Spain that removed restrictions on fixed‐term or temporary contracts. Our empirical results are based on longitudinal firm‐level data that cover observations before and after the reform. We posit and estimate a dynamic labor demand model with indefinite and fixed‐term labor contracts, and a general structure of labor adjustment costs. Experiments using the estimated model show important positive effects of the reform on total employment (i.e., a 3.5% increase) and job turnover. There is a strong substitution of permanent by temporary workers (i.e., a 10% decline in permanent employment). The effects on labor productivity and the value of firms are very small. In contrast, a counterfactual reform that halved all firing costs would produce the same employment increase as the actual reform, but much larger improvements in productivity and in the value of firms. (JEL J23, J32, J41)     

A COMPETITIVE MODEL OF WORKER REPLACEMENT AND WAGE RIGIDITY

We adapt the models of Menzio and Moen (2010) and Snell and Thomas (2010) to consider a labor market in which firms can commit to wage contracts but cannot commit not to replace incumbent workers. Workers are risk averse, so that there exists an incentive for firms to smooth wages. Real wages respond in a highly nonlinear manner to shocks, exhibiting downward rigidity, and magnifying the response of unemployment to negative shocks. We also consider layoffs and show that for a range of shocks labor hoarding occurs while wages are cut. We argue these features are consistent with recent evidence. (JEL E32, J41)     

The Relationship Between Referral Types,Work Performance,and Employee Problems

The relationship between the types of supervisory referrals and self-referrals to an employee assistance program to the work performance and kinds of personal problems of the employees referred is examined. For formal supervisory referrals Absenteeism was the most common work performance problems; for informal supervisory referrals Awareness of Slipping was the reason most commonly noted: and for self-referrals Interpersonal Relations problems predominated. Among employees wih alcohol and drug problems, more were self-referred than formally or informally referred by supervisors.     

The interplay between formal project memberships and informal advice seeking in knowledge-intensive firms: A multilevel network approach

In this study we investigate the interplay between knowledge workers’ formal project team memberships and their informal interactions from a multilevel network perspective. Conceptualizing knowledge workers’ affiliation with project teams as a membership network and their interactions as an advice network, we discuss how shared project team memberships as well as multiple memberships influence patterns of informal exchange in knowledge-intensive organizations. To empirically determine the impact of formal organization on informal exchange we apply exponential random graph models for multilevel networks to relational data collected on 434 R&D employees working on 218 project teams in a high-tech firm in Germany. Our results show that employees sharing project memberships create advice ties to each other but do not exchange advice reciprocally. In addition, we find a negative relationship between having a high number of project memberships and informally seeking or providing advice.     

PAY, TECHNOLOGY, AND THE COST OF WORKER ABSENCE

Conventional studies of absenteeism concentrate on labor supply. An equilibrium approach, however, establishes that the shadow cost of absenteeism varies across firms that operate different technologies. Using an unusual employee/employer matched data set from France, which records both individual worker absenteeism and information about technology, we show that firms operating just-in-time technology have higher shadow costs of absence than firms that do not. The estimates are used to calculate the economy-wide cost of absence, which turns out to be very low. ( JEL J22, J31, J41)     

Formal and Informal Social Organization: Do Geography,Structural Inequality,and Other Forms of Social Organization Matter?

Neighborhood social organization is one way that neighborhoods matter for residents, as well as an intervention opportunity for macro practitioners. Neighborhood social organization encapsulates how neighborhoods differentially organize, both formally and informally. We tested whether neighborhood structural inequality, types of social organization, and spatial clustering were associated with both formal and informal neighborhood social organization. Formal and informal social organization were mutually reinforcing. Formal social organization, measured by organizational participation, predicted informal social organization. In multivariate spatial analysis, organizational participation was also influenced by adjacent neighborhoods. Practitioners should consider how adjacent neighborhoods could affect place-based interventions.     

Organizational Uncertainty and Labor Contracts in China's Economic Transition

Lifetime employment was a cornerstone of the Chinese socialist system constructed under Mao. In this system, organizations served the function of social security, and as a result, many organizations were overburdened with bloated work forces and retirees that drew from organizational coffers well into old age. Labor contracts fundamentally alter this system, as they allow firms to end the socialist institution of lifetime employment. Yet there is significant variation on the institutionalization of labor contracts in organizations. Based on a sample of 81 firms in industrial Shanghai, I show that organizations that are experiencing uncertainty in the economic transition are more likely to institutionalize labor contracts on an organizationwide basis. There are two types of organizational uncertainty in the economic transition: economic uncertainty and administrative uncertainty. In cases of economic uncertainty, firms that lost money in 1990 and firms that are burdened by large forces of retired workers are more likely to place their workers on labor contracts. In the case of administrative uncertainty, firms that are at the highest levels of the industrial hierarchy are also significantly more likely to place their workers on labor contracts. Although these upper level firms were the most protected under the command economy, they are being forced to handle the greatest among the responsibilities in the economic transition, and as a result, they experience the greatest sense of being set adrift by the state.