The Dynamics of Parallel Economies. Measuring the Informal Sector in México

Jose Brambila Macias
Authors registered in the RePEc Author Service: Jose Brambila-Macias

MPRA Paper from University Library of Munich, Germany

Abstract: The existence of parallel economies that operate in the shadows of informality within most Latin American countries is widely recognized by the economic literature. However, its composition, size and effects on economic growth are still open questions. In this paper, we estimate the size and the evolution of the Mexican informal economy in the last three decades using a vector error correction model. In addition to the standard explanatory variables traditionally used in the currency demand approach, we include remittances given their relevance in the Mexican economic system. The results indicate that informality prior to the late 1980’s accounted for at least two thirds of GDP, while stabilizing around one third of GDP in the last decade. Furthermore, our estimates provide evidence of a positive long run relationship between informality and economic growth.

Keywords: Informal Sector; currency demand; VEC; Remittances (search for similar items in EconPapers)
JEL-codes: C32 E41 F24 O17 (search for similar items in EconPapers)
Date: 2008-03-31
New Economics Papers: this item is included in nep-dev
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: The dynamics of parallel economies. Measuring the informal sector in Mexico (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:8400

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