Scandinavian Working Papers in Economics
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Department of Economics, Lund University Working Papers, Department of Economics, Lund University

No 2010:13:
Government Effectiveness and Regional Variation in Informal Employment

Erik Jonasson ()

Abstract: This paper analyses the role of government effectiveness in the determination of informal employment. A theoretical model is developed, in which local governance and worker skill level are assumed to influence the decision of the worker whether to seek employment in the formal or informal sector. The model is assessed empirically using data from Brazil, where almost half of the urban labour force is employed informally. The empirical analysis supports the predictions of the model and suggests that informal employment is lower in regions with better governance and higher average education.

Keywords: informal employment; government effectiveness; Latin America; Brazil; (follow links to similar papers)

JEL-Codes: J21; J24; O17; R23; (follow links to similar papers)

18 pages, October 26, 2010, Revised March 31, 2011

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This paper is forthcoming as:
Jonasson, Erik, 'Government Effectiveness and Regional Variation in Informal Employment', Journal of Development Studies.

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