The effect of informal employment and corruption on income levels in Brazil

Jamie Bologna

Journal of Comparative Economics, 2016, vol. 44, issue 3, 657-695

Abstract: This paper exploits a unique dataset on corruption and informal sector employment in 476 Brazilian municipalities to estimate whether corruption impacts GDP or income levels once variation in informal economic activity is taken into account. Overall, I find that higher levels of corruption and a large informal economy are generally associated with poor economic outcomes. However, only the size of the informal economy has a statistically significant effect. This effect is robust to the inclusion of a variety of controls and fixed effects, as well as an instrumental variable analysis. Further, these effects are large in magnitude. For example, a one standard deviation increase in the share of total employees that are informally employed explains a decrease in GDP per-capita of about 18%.

Keywords: Corruption; Informal economy; Income levels; Growth (search for similar items in EconPapers)
JEL-codes: D73 O17 O43 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:44:y:2016:i:3:p:657-695

DOI: 10.1016/j.jce.2015.12.001

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