Informality as a Stepping Stone: Entrepreneurial Entry in a Developing Economy We model decisions with respect to formality or informality for entrepreneurs in a new industry for a developing economy. We show that informality allows a leader to explore, without significant sunk costs, the potential profitability of the industry; that is, informality may be a stepping stone, enabling an entrepre...

We investigate the dynamic general equilibrium effects of introducing a social assistance program to elderly informal sector workers in developing countries. We find that the extension of such “retirement benefits” in environments with lacking private sector risksharing mechanisms results in welfare increases and relatively minor efficiency losses. Our results suggest that welfare gains attribu...

We construct a simple model incorporating various urban labour market phenomena obtaining in developing economies, and we give a diagrammatic formulation of the market equilibrium. Our initial formulation assumes an integrated labour market and allows for entrepreneurship, self-employment, and wage employment. We then introduce labour market segmentation. In equilibrium voluntary and involuntar...

Policy interest since the early 1980s has focused in different ways on the creation of a large, productive, taxable economy – in which entrepreneurship plays a role for employment, income growth and innovation. The current understanding of various forms of entrepreneurship remains incomplete, focusing largely on productive and unproductive entrepreneurship. However, destructive entrepreneurship...

The Size of the Shadow Economies of 145 Countries all over the World: First Results over the Period 1999 to 2003 Using the DYMIMIC approach, estimates of the shadow economy in 145 developing, transition, developed OECD countries, South Pacific islands and still communist countries are presented. The average size of the shadow economy (in percent of official GDP) over 2002/2003 in developing cou...

This research analyses through the use of instrumental variables estimation whether democracy has an effect on variables belonging to three different categories: fiscal policy, inequality in income distribution and political instability. It shows there is no stable relation between democracy and fiscal policy variables between countries of the sample in the 1978-1988 period. Democracy, on the o...

This paper studies the electoral effects of town hall meetings based on programmatic, nonclientelist platforms. The experiment involves the cooperation of leading candidates in a presidential election in Benin. A campaign strategy based solely on these meetings was assigned to randomly selected villages and compared to the standard strategy of clientelist rallies. We !nd that treatment reduces ...

Contract enforcement is probabilistic, but the probability depends on rules and processes. A stimulus to trade may induce traders to alter rules or processes to improve enforcement. In the model of this paper, such a positive knock-on effect occurs when the elasticity of supply of traders is sufficiently high. Negative knock-on is possible when the elasticity is low. Enforcement strategies in c...

The aim of this paper is to understand the impact of optimal provision of both risk and incentives on the choice of contracting partners. I study a risky setting where heterogeneously risk-averse employers and employees must match to be productive. They face a standard onesided moral hazard problem: mean output increases in the noncontractible input of the employee. Better insurance comes at th...

Religion is increasingly acknowledged to be a cultural dimension which affects economic outcomes in different regards. This contribution focuses on religion’s possible impact on the shadow economy. Different dimensions of the religious markets are taken into account. These dimensions refer to the overall degree of religiosity, the specific impact of different religions, religious competition or...