Informal Employment in Transition Countries: Empirical Evidence and Research Challenges

Quaderni - Working Paper DSE N° 982

43 Pages Posted: 12 Dec 2014

See all articles by Hartmut Lehmann

Hartmut Lehmann

University of Bologna - School of Economics, Management, and Statistics; IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: December 10, 2014

Abstract

Even though informal employment is wide-spread in transition economies the literature on this phenomenon in the region is rather scarce. For policy makers it is important to know the incidence and the determinants of informal employment. In the first part of the paper we demonstrate that its incidence and to a lesser degree its determinants depend on the definition used. We then discuss studies that attempt to test for labor market segmentation in transition economies along the formal-informal divide. The presented results are inconclusive and we come to the conclusion that more work needs to be done before we can make definitive statements about whether labor markets are integrated or segmented in transition economies. Last but not least we introduce a new research area that links risk preferences and selection into labor market states. We show that if individuals have a choice, relatively risk loving workers have an increased likelihood to choose informal employment and self-employment.

Keywords: Informal employment, definitions, determinants, risk preferences, transition economies

JEL Classification: D03, J43, P23

Suggested Citation

Lehmann, Hartmut F., Informal Employment in Transition Countries: Empirical Evidence and Research Challenges (December 10, 2014). Quaderni - Working Paper DSE N° 982. Available at SSRN: https://ssrn.com/abstract=2536808 or http://dx.doi.org/10.2139/ssrn.2536808

Hartmut F. Lehmann (Contact Author)

University of Bologna - School of Economics, Management, and Statistics ( email )

Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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