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2019 | OriginalPaper | Chapter

Globalization and the Informal Economy in Developing Countries

Author : Kameliia Petrova

Published in: Globalization and Development

Publisher: Springer International Publishing

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Abstract

It has been documented that developing countries are plagued by sizable informal sectors. There are a lot of studies addressing either the informal economies or globalization. However, the literature on whether and how globalization affects the informal sector is somewhat lacking. Several theories are formulated, but empirical studies do not all agree on what facets of globalization affect informality and how. Part of the problem is data deficiency and somewhat lacking synchronization of the existing informal sector data. There are some recent developments in this area that have furthered the subject. The goal of this chapter is to offer an extensive overview on the topic of globalization and informality.

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previous chapter Globalization Development Within the Group of Twenty (G20) as Indicated by Globalization and Innovation Indices

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The FDI net inflows for all participating countries are shown in Appendix 3.

http://www.kof.ch/globalization

Some alternative, less well-recognized, measures of globalization are the Maastricht Globalization Index (Martens and Zywietz 2006), the World Market Research Centre G-Index (“WMRC” 2001), the A.T. Kearney/Foreign Policy Magazine Globalization Index (“ATK/FP” 2001; “ATK/FP” 2004; “ATK/FP” 2005), the Global Civil Society Index (Salamon and Sokolowski 2004), globalization matrix (Al-Rodhan et al. 2006), the Cultural Globalization Index (Kluver and Fu 2004), measures of political integration (Miles and Posner 2008; Nitsch 2007), Growth Environment Score (O’Neill et al. 2005), as well as measures replicating those mentioned above (Andersen and Herbertsson 2005; “CSGR index” 2006; Heshmati 2006; Li et al. 2007) or cover only few countries (Bamrud 2005; Gersbach 2002). OECD (2005) constructs separate globalization indicators.

The term was coined by Bhagwati (1958) as a reference to economic growth that makes the country worse off. Immiserizing growth that is due mainly to expanding exports worsens the terms of trade sufficiently and causes real income to fall.

Goldberg and Pavcnik (2003) also present a theoretical model to study the effect of trade liberalization on informality in the framework of the efficiency wage theory. They, however, ignore general equilibrium effects.

Full employment, also known as natural rate of unemployment, is a concept used in economics to describe situations where workers who are willing to work at the current wage rates in the economy are able to find jobs. If unemployment exists, it’s voluntary (due to workers changing job or seasonality) and considered normal, reduced to a certain established level (Ehrenberg and Smith 2000, p. 590; Todaro and Smith 2015, p. 824).

United Nations Conference on Trade and Development (UNCTAD) indices of exports and imports of countries and country groups.

See Appendix 3.

Annual percentage change of the trade restriction indicator.

Taken from the Common Analytical Market Access Database (CAMAD).

Sum of exports and imports as a share of GDP.

Inflows of FDI as a share of GDP.

The political globalization component of the KOF index is excluded.

This is done by calculating probabilities and posterior distributions over coefficients and models. The BMA has a history of applications in the economic growth literature.

Source: ILO: Women and Men in the Informal Economy: A Statistical Picture (2018, pp. 28, 32, 26).

Charmes (2012, pp. 110–113).

https://data.worldbank.org/indicator/BX.KLT.DINV.WD.GD.ZS and Schneider (2005, pp. 627–629).

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Title: Globalization and the Informal Economy in Developing Countries
Author: Kameliia Petrova
Publisher: Springer International Publishing
Book: Globalization and Development
Print ISBN: 978-3-030-14369-5

Electronic ISBN: 978-3-030-14370-1

Copyright Year: 2019
DOI: https://doi.org/10.1007/978-3-030-14370-1_3

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