%0 Report
        %A Arvin-Rad, Hassan
%A Basu, Arnab K.
%A Willumsen, Maria
        %T Economic Reform, Informal-Formal Sector Linkages and Intervention in the Informal Sector in Developing Countries: A Paradox
        %D 2010
        %8 2010 Oct
        %I Institute of Labor Economics (IZA)
        %C Bonn
        %7 IZA Discussion Paper
        %N 5229
        %U https://www.iza.org/index.php/publications/dp5229
        %X Within a general equilibrium framework of a developing economy with a foreign owned factor of production, this paper questions whether the informal-formal sector relationship is pro-cyclical/ complementary – expansion or contraction in one necessarily implies an expansion or contraction in the other – when the informal sector is subject to a technological shock. We derive a necessary and sufficient condition under which a positive shock to the informal sector results in a contraction in both the size of the urban formal sector and the informal sector. Thus, although our result shows that the informal-formal sector relationship is pro-cyclical, it nevertheless calls into question the conventional wisdom on the benefits of intervention in the informal sector of developing economies, particularly where multinational corporations sub-contract certain labor intensive stages of production to the informal sector.
        %K Within a general equilibrium framework of a developing economy with a foreign owned factor of production
%K although our result shows that the informal-formal sector relationship is pro-cyclical
%K it nevertheless calls into question the conventional wisdom on the benefits of intervention in the informal sector of developing economies
%K this paper questions whether the informal-formal sector relationship is pro-cyclical/ complementary – expansion or contraction in one necessarily implies an expansion or contraction in the other – when the informal sector is subject to a technological sho
%K particularly where multinational corporations sub-contract certain labor intensive stages of production to the informal sector.