EconPapers    
Economics at your fingertips  
 

The effect of commuting costs and transport subsidies on informality rates

Ana 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)
JEL-codes: J3 O14 O17 R12 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304387817300676
Full text for ScienceDirect subscribers only

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: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
Bibliographic data for series maintained by Haili He ().

 
Page updated 2020-07-26
Handle: RePEc:eee:deveco:v:130:y:2018:i:c:p:99-112