 The effect of commuting costs and transport subsidies on informality ratesAna Moreno-Monroy and Héctor M. Posada Journal of Development Economics, 2018, vol. 130, issue C, 99-112 Abstract: In this article we study the relationship between accessibility and informality using a spatial search model. In the model, formal workers commute every day to the Central Business District (CBD) to work in formal firms. Informal workers choose their commuting frequency knowing that they either can work at home and save on commuting costs, or have a higher remuneration at the CBD but incur commuting costs. We demonstrate that the difference in urban costs between formal and informal workers is a mechanism through which improvements in accessibility lead to lower informality rates. Next, we use the model to compare the impact and efficiency of four policy options: a hiring-costs subsidy and a transport subsidy for either all workers, formal workers, or informal workers. We find that a transport subsidy targeted at informal workers is undesirable. We also find that a hiring-costs subsidy is superior to transport subsidies in reducing informality. Keywords: Informality; Transport; Search-and-matching; Commuting (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:130:y:2018:i:c:p:99-112 DOI: 10.1016/j.jdeveco.2017.09.004 Access Statistics for this article Journal of Development Economics is currently edited by M. R. Rosenzweig More articles in Journal of Development Economics from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.