We build a general equilibrium model in which both illegal immigration and the size of the informal sector are endogenously determined. In this framework, we show that indirect policy measures such as tax reduction and detection of informal activities can be used as substitutes for border...

Many empirical studies found wage gaps between formal and informal sector workers even after controlling for a number of individual and firm level characteristics. While there is limited amount of research considering the same question in the Turkish labor market, wage gap between formal and...

This paper examines the relationship between the shadow economy and trade openness in Uganda, using autoregressive distributed lag bounds testing approach. We find that the shadow economy and trade openness have a long- and short-run relationship. These results hold even when alternative...

This paper investigates whether corruption has contributed to the rise of the shadow economy in Uganda. Using autoregressive distributed lag bounds testing approach and granger causality econometric methods we find a positive relationship between corruption and the size of the shadow economy in...

This paper provides new evidence on the wage gap between informal and formal salary workers in South Africa, Brazil and Mexico. We use rich datasets that allow us to define informality in a relatively comparable fashion across countries. We compute precise wage differentials by accounting for...

This paper analyses the determinants of the size of the informal economy using crosscountry regressions. Two sets of global data using indirect estimation techniques and the perception of business leaders for 109 countries as well as a regional set for Latin America based on direct data are used...

This paper investigates the relationship between ethnic fragmentation and the size of the informal economy. Recent experimental and empirical research links, in turn, ethnicity and trust, and trust and tax compliance. In addition, recent empirical studies have identified an unwillingness to...

The paper quantitatively investigates, in general equilibrium, the interaction between the firms’ choice to operate in the formal or the informal sector and government policy on taxation and enforcement, given a level of regulation. A static version of Ghironi and Melitz’s (2005) industry...

This paper analyzes, using country-level panel data from transition economies and Latin America, the impact of labor market institutions on informal economic activity. The measure of informal economic activity is taken from Schneider et al. (2010), the most comprehensive study to date. The data...

We build an equilibrium model of a small open economy with labor market frictions and imperfectly enforced regulations. Heterogeneous firms sort into the formal or informal sector. We estimate the model using data from Brazil, and use counterfactual simulations to understand how trade affects...