TY  - RPRT
        AU  - Arvin-Rad, Hassan
AU  - Basu, Arnab K.
AU  - Willumsen, Maria
        TI  - Economic Reform, Informal-Formal Sector Linkages and Intervention in the Informal Sector in Developing Countries: A Paradox
        PY  - 2010/Oct/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 5229
        UR  - https://www.iza.org/index.php/publications/dp5229
        AB  - 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.
        KW  - Within a general equilibrium framework of a developing economy with a foreign owned factor of production
KW  - although our result shows that the informal-formal sector relationship is pro-cyclical
KW  - it nevertheless calls into question the conventional wisdom on the benefits of intervention in the informal sector of developing economies
KW  - 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
KW  - particularly where multinational corporations sub-contract certain labor intensive stages of production to the informal sector.
        ER  -