Informal Labour and Credit Markets: A Survey

By Paul L Levine, Emanuela Lotti, Nicoletta Batini, Young-Bae Kim

February 1, 2010

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Format: Chicago

Paul L Levine, Emanuela Lotti, Nicoletta Batini, and Young-Bae Kim. Informal Labour and Credit Markets: A Survey, (USA: International Monetary Fund, 2010) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper reviews the literature on the informal economy, focusing first on empirical findings and then on existing approaches to modeling informality within both partial and general equilibrium environments. We concentrate on labour and credit markets, since these tend to be most affected by informality. The phenomenon is particularly important in emerging and other developing economies, given their high degrees of informal labour and financial services and the implications these have for the effectiveness of macroeconomic policy. We emphasize the need for dynamic general equilibrium (DGE) and ultimately dynamic stochastic general equilibrium (DSGE) models for a full understanding of the costs, benefits and policy implications of informality. The survey shows that the literature on informality is quite patchy, and that there are several unexplored areas left for research.

Subject: Credit, Informal economy, Informal employment, Labor, Wages

Keywords: Adverse selection, Credit market friction, Credit market imperfection, Credit rationing, Informal credit markets, WP

Publication Details

Pages:

41
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2010/042
Stock No:

WPIEA2010042
ISBN:

9781451962963
ISSN:

1018-5941

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