Download Comments on Rethinking the Effect of informality on Inclusive

Comments on Rethinking the Effect of
informality on Inclusive Growth: Lessons
from Colombia and South Africa
Angel Melguizo
ELLA Summit on Informality and Inclusive Growth
Johannesburg, October 4-5 2016
Comments on Rethinking the Effect of informality
on Inclusive Growth: Colombia and South Africa
• Analyses the impact of informality on inclusive
growth, applied empirically to Colombia and South
Africa
• Analysis of inclusive growth is very timely: lowgrowth trap and increasing inequalities
• Informal is normal (in most emerging economies)
• Informalities mean different policy recommendations
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Comments on Rethinking the Effect of informality
on Inclusive Growth: Colombia and South Africa
Colombia vs South Africa
Population
1.2
1
0.8
Informality
0.6
GDP per
capita
0.4
0.2
Colombia
0
Urban
population
South Africa
Services
Working age
population
Many socio-economic similarities (and some diff.)
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Comments on Rethinking the Effect of informality
on Inclusive Growth: Colombia and South Africa
• Methodology
• Results
• Comments
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Comments on Rethinking the Effect of informality
on Inclusive Growth: Colombia and South Africa
• Methodology
• Results
• Comments
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Methodology (I)
• Original conceptual framework
Informality as the default option (surveys)
Preference for informality
Transition between informality and formality
Counter-cyclicality
High incidence of informality in low-productivity groups
Level of Productivity
Percent of workers earning wages below minimum hiring cost
Implicit: Indicators of segregation
Barriers to Formality
Explicit: High formal market barriers (international comparison)
Source: Author’s own work.
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Methodology (and II)
• Assumptions on types of informality and their
impact inclusive growth
• Voluntary
• Subsistence
• Induced
+ micro
+ micro
- micro
- macro
+ macro (short-run)
- macro
• Empirical analysis for Colombia and South Africa
(plus Sub-Saharan Africa and Latin America)
• Survey data (household surveys)
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Comments on Rethinking the Effect of informality
on Inclusive Growth: Colombia and South Africa
• Methodology
• Results
• Comments
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Results
• Informality is higher in Colombia than in South Africa
• 55% (40-65) vs 30% (20-70)
• Heterogeneity among informal workers
• Voluntary/Subsistence/Induced (1/3) in Colombia
• Mostly Subsistence in South Africa
• Policy recommendations to foster inclusive growth
 Policy pack (implicit + explicit barriers)
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Comments on Rethinking the Effect of informality
on Inclusive Growth: Colombia and South Africa
• Methodology
• Results
• Comments
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Comments (Ia)
• Nice conceptual framework: informalities
COSTE > V(BENEFICIO)
TRABAJADOR
I. Informalidad como elección
COSTE > V(BENEFICIO)
EMPRESA
COSTE < V(BENEFICIO)
TRABAJADOR
II. Exclusión
Cuenta propia de ba ja va loración de la SS y s i n
meca nismos de ahorro forzoso
- la informalidad es óptima.
Asalariados que va l oran la SS pero trabajan para
empresas pequeñas que eva den fácilmente.
-Informalidad que excluye
Asalariados que no valoran la SS y trabajan para
empresas pequeñas que evaden fácilmente.
- La informalidad es óptima. - no se cumplen los
objetivos sociales.
III. Evasión
COSTE < V(BENEFICIO)
EMPRESA
IV. Formalidad óptima
Asalariados que no va loran la SS pero tra bajan para
empresas grandes con dificultades para evadir.
- La incidencia de la SS en las empresas
- Búsqueda de mecanismos para no contribuir.
Asalariados que valoran la SS y trabajan para
empresas que no evaden.
-La formalidad es óptima
Cuenta propia de alta valoración de la SS pero no
tienen mecanismos de ahorro forzoso.
-Contribuir es óptimo per pueden no contribuir por
falta de mecanismos.
Source: Bosch, M., C. Pages and A. Melguizo (2013), Better Pensions, Better Jobs. IDB
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Comments (Ib)
• Nice conceptual framework: informalities
Source: Bosch, M., C. Pages and A. Melguizo (2013), Better Pensions, Better Jobs. IDB
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Comments (II)
• Convincing empirical analysis (methodology
sources), especially preference/prevented
Dimension
Choice
Barriers to Formality
Indicator
South Africa
Transition between
informality and formality
Medium (26%)
Preferences for informalitysurveys
Very low (22%)
Cyclicality: coefficient of
correlation
Pro-cyclical
-0.38 using lagged
GDP, 0.63 using GDP
Colombia Total
Labour tax / commercial
profits
Low (4%)
Colombia 13-areas
Low (14%)
Low (35.9%)
Low (41.5%)
Counter-cyclical
-0.42%**, using output gap
Medium
Women (1.5***)
High
Women (1.1***)
Ethnic minorities:
Indicators of segregation.
probability of informality is
Ethnic differences:
Relative probability of
(0.49***, White 0.3*** and
5.4 p.p higher for
being informal
Asian 0.5***, relative to indigenous people and 2.2
Africans)
p.p higher for afroColombians
Minimum wage / average Low (17%) (wholesale and
wage
retail sector)
&
High (66%)
Medium
Women (1.5***)
High (55%)
Medium high (18.6%)
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Comments (III)
• Distinction subsistence vs induced might be not so
clear (e.g. minimum wage * labor taxes)
Informality and theoretical formalisation costs
Source: OECD/CIAT/IDB (2016), Taxing Wages in Latin America and the Caribbean.
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Comments (IV)
• Any chance to analysis flows among types of informals?
Is subsistence informality a trap?
Source: OECD/ECLAC/CAF (2016), Latin American Economic Outlook 2017. Forthcoming
Informality vs Subsistence entrepreneurs
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Comments (V)
• Analysis by socio-economic groups – Informality among
the vulnerable middle-class
Source: Melguizo, A. (2015), Pensions, Informality and the Emerging Middle Class. IZA World of Labor.
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Comments (and VI)
• Elasticities: informality(ies) vs implicit and explicit
barriers
Source: Gonzalez-Paramo, J.M. and A. Melguizo. (2013), Who pays labour taxes and social contributions? A meta-analysis
approach. SERIES, 4, 247-71
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Thanks!
Angel Melguizo
ELLA Summit on Informality and Inclusive Growth
Johannesburg, October 4-5 2016