Seeking Rent in the Informal Sector

22 Pages Posted: 28 Jan 2019

See all articles by Saibal Kar

Saibal Kar

Centre for Studies in Social Sciences, Calcutta; Institute of Labor Economics (IZA)

Biswajit Mandal

Visva-Bharati University - Department of Economics and Politics

Sugata Marjit

Centre for Studies in Social Sciences, Calcutta; City University of Hong Kong (CityUHK) - Department of Economics & Finance

Vivekananda Mukherjee

Jadavpur University

Abstract

Rent seeking within the vast informal segment of the developing world is a relatively underdexplored topic in the interface of labor market policies and public economics. Moreover, how rent seeking and corruption within the informal segment is affected by economic reforms targeted for the formal sector is rarely discussed in the literature. This paper fills the gap. We identify conditions under which economic reform in the formal segment will increase the rate of corruption or rent seeking in the informal sector and raise the pay-off for those involved in rent seeking activities. When formal sector contracts due to reforms, offsetting forces determine the magnitude of rent seeking in the informal sector. Thus, economic reforms may increase corruption instead of reducing it, as claimed previously.

Keywords: corruption, rent seeking, reforms, informal sector, regulators

JEL Classification: D73, E26, M48

Suggested Citation

Kar, Saibal and Mandal, Biswajit and Marjit, Sugata and Mukherjee, Vivekananda, Seeking Rent in the Informal Sector. IZA Discussion Paper No. 12068. Available at SSRN: https://ssrn.com/abstract=3323183

Saibal Kar (Contact Author)

Centre for Studies in Social Sciences, Calcutta ( email )

R-1, Baishnabghata Patuli Township
Calcutta, 700 094
India
91-33-2462 7252 (Phone)
91-33-2462 6183 (Fax)

HOME PAGE: http://www.cssscal.org

Institute of Labor Economics (IZA) ( email )

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

Biswajit Mandal

Visva-Bharati University - Department of Economics and Politics ( email )

Santiniketan 731235, West Bengal
India

Sugata Marjit

Centre for Studies in Social Sciences, Calcutta ( email )

R 1, B.P. Township
Kolkata, West Bengal, India
Kolkata, West Bengal 700094
India

City University of Hong Kong (CityUHK) - Department of Economics & Finance ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

Vivekananda Mukherjee

Jadavpur University ( email )

Calcutta, West Bengal 700032
India

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