Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/260711 
Year of Publication: 
2021
Citation: 
[Journal:] IZA World of Labor [ISSN:] 2054-9571 [Article No.:] 325v2 [Publisher:] Institute of Labor Economics (IZA) [Place:] Bonn [Year:] 2021
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
Higher inequality reduces capital accumulation and increases the informal economy, which creates additional employment opportunities for low-skilled and deprived people. As a result, informal employment leads to beneficial effects on income distribution by providing sources of income for unemployed and marginalized workers. Despite this positive feedback, informality raises problems for public finances and biases official statistics, reducing the effectiveness of redistributive policies. Policymakers should consider the links between inequality and informality because badly designed informality-reducing policies may increase inequality.
Subjects: 
informality
inequality
shadow economy
JEL: 
D64
H41
J31
Persistent Identifier of the first edition: 
Document Type: 
Article

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