Is Informality a Barrier to Convergence?

Ceyhun Elgin and Ferda Erturk ()
Additional contact information
Ferda Erturk: University of Maryland

Economics Bulletin, 2016, vol. 36, issue 4, 2556-2568

Abstract: In this paper we ask whether informal economy acts as a barrier to growth of GDP per-capita. Cross-country panel regressions for the period between 1960 and 2012 including 160 countries provide evidence for a robust negative relationship between size of informal economy and relative per capita income. Building on this evidence we simulate a simple two-sector (formal and informal) dynamic general equilibrium model and show that under the presence of an informal sector a larger fraction of the observed per capita income differences across countries can be accounted for.

Keywords: convergence; two-sector DGE models; informal sector; pane data (search for similar items in EconPapers)
JEL-codes: E1 O4 (search for similar items in EconPapers)
Date: 2016-12-29
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.accessecon.com/Pubs/EB/2016/Volume36/EB-16-V36-I4-P246.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-16-00667

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().