The persistence of informality: Evidence from panel data

Arbeitspapier

Informality is a growing phenomenon in the developing and transition country labor market context. In particular, it is noticeable that working in an informal employment relationship is often not temporary. The degree of persistence of informality in the labor market might be due to different sources: structural state dependence due to past informality experiences and spurious state dependence due to time-invariant unobserved individual effects, which can alter the propensity of being in the informal sector independently from actual informality experiences. The purpose of our paper is to study the dynamics of informality using a genuine panel data set in the Ukrainian labor market. By estimating a dynamic panel data probit model with endogenous initial conditions, we find a highly significant degree of persistence due to previous informality experiences. This result implies that policies attempting to reduce current levels of informality may have a long-lasting effect on the labor market.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 6163

Classification and Topics

• Classification: Wirtschaft ; Welfare Economics: General ; General Welfare; Well-Being
• Subject: informality ; unobserved heterogeneity ; state dependence ; transition countries ; Informeller Sektor ; Schwarzarbeit ; Hysteresis ; Übergangswirtschaft ; Ukraine

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Akay, Alpaslan ; Khamis, Melanie
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/58919
• URN: urn:nbn:de:101:1-2012010913906
• Last update: 10.03.2025, 11:44 AM CET