In this paper we study the role of income distribution as a determinant of the size of the informal sector in an economy. We rely on a channel whereby inequality affects the behaviour of aggregate demand and thus influences the incentives a firm has to become informal. We further postulate that...

The literature on economics of transition has suggested a number of scenarios to explain unemployment and labor reallocation in Eastern Europe. However, it has recently been argued that these so-called Optimal Speed of Transition (OST) studies do not account for many stylized facts concerning...

This chapter reviews what economists have learned about the impact of labor market institutions, defined broadly as government regulations and union activity on labor outcomes in developing countries. It finds that: (1) Labor institutions vary greatly among developing countries but less than...

Vast literature is available covering main Informal Economy (IE) causes and consequences for Latin America and Caribbean (LAC), but its size estimation has been mainly limited to worldwide models applied to the region. This paper proposes a MIMIC Base Model using a data set composed by 41...