How Informal Sector Affects the Formal Economy in Pakistan? A Lesson for Developing Countries

IF 0.3 Q4 ECONOMICS

South Asian Journal of Macroeconomics and Public Finance Pub Date : 2020-01-30 DOI:10.1177/2277978719898975

K. Mughal, F. Schneider

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引用次数: 14

Abstract

We explore the interaction of the informal sector with the formal economy for a developing economy, that is, Pakistan. Estimation results are obtained via autoregressive distributed lag (ARDL) bounds testing approach, which show a significantly positive effect of the informal sector in the long run whereas a negative impact of informal sector is found in the short run. We also present dynamic simulations to show the effect/contribution in terms of revised GDP per capita if the informal sector is accounted for in official statistics. The novelty of results is the varying effects of the informal sector across two time horizons that can have serious policy implications for developing and transition economies with large informal sectors. Although, the findings of this article enrich our understanding on the behaviour of the informal sector, they further fuel the debate associated with eradication of the informal sector. Efforts to curb informal activities may burden the low-skilled workforce in this sector and increase corruption opportunities in bureaucracy in the absence of institutional reforms. On the contrary, it makes the formal sector policy design and implementation a challenging task. JEL Classification: E26, H26, K42, O17

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巴基斯坦非正规部门如何影响正规经济?给发展中国家的一个教训

我们探讨了发展中经济体，即巴基斯坦的非正规部门与正规经济的互动。通过自回归分布滞后（ARDL）边界检验方法获得了估计结果，从长远来看，非正规部门具有显著的积极影响，而从短期来看，非官方部门具有负面影响。我们还提供了动态模拟，以显示如果在官方统计中考虑非正规部门，对修订后的人均GDP的影响/贡献。结果的新颖之处在于非正规部门在两个时间范围内的不同影响，这可能对拥有大型非正规部门的发展中经济体和转型经济体产生严重的政策影响。尽管这篇文章的研究结果丰富了我们对非正规部门行为的理解，但它们进一步推动了与根除非正规部门有关的辩论。在缺乏体制改革的情况下，遏制非正规活动的努力可能会给该部门的低技能劳动力带来负担，并增加官僚机构的腐败机会。相反，它使正规部门政策的设计和执行成为一项具有挑战性的任务。JEL分类：E26、H26、K42、O17

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来源期刊

South Asian Journal of Macroeconomics and Public Finance ECONOMICS-

CiteScore

2.10

自引率

11.10%

发文量

期刊介绍： The purpose of the Journal is to publish (in English language) peer-reviewed articles, reviews and scholarly comments on issues relating to contemporary global macroeconomics and public finance by which is understood: The Journal is for all professionals concerned with contemporary Macroeconomics and Public Finance and is a forum for all views on related subjects. The Editorial Board welcomes articles of current interest on research and application on the areas mentioned above. The Journal will be international in the sense that it seeks research papers from authors with an international reputation and articles that are of interest to an international audience. In pursuit of the above, the journal shall: a. draw on and include high quality work from the international community of scholars including those in the major countries of Asia, Europe, Asia Pacific, the United States, other parts of the Americas and elsewhere with due representation for considerations of the readership. The Journal shall include work representing the major areas of interest in contemporary research on Macroeconomics and Public Finance and on a wide range of issues covering macro- economics, tax and fiscal issues, banking and finance, international trade, labour economics, computational and mathematical methods, etc. The Journal would particularly engage papers on pure and applied economic theory and econometric methods. b. avoid bias in favour of the interests of particular schools or directions of research or particular political or narrow disciplinary objectives to the exclusion of others. c. ensure that articles are written in a terminology and style which makes them intelligible, not merely within the context of a particular discipline or abstract mode, but across the domain of relevant disciplines.