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The effect of informal employment and corruption on income levels in Brazil

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  • Bologna, Jamie

Abstract

This paper exploits a unique dataset on corruption and informal sector employment in 476 Brazilian municipalities to estimate whether corruption impacts GDP or income levels once variation in informal economic activity is taken into account. Overall, I find that higher levels of corruption and a large informal economy are generally associated with poor economic outcomes. However, only the size of the informal economy has a statistically significant effect. This effect is robust to the inclusion of a variety of controls and fixed effects, as well as an instrumental variable analysis. Further, these effects are large in magnitude. For example, a one standard deviation increase in the share of total employees that are informally employed explains a decrease in GDP per-capita of about 18%.

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  • Bologna, Jamie, 2016. "The effect of informal employment and corruption on income levels in Brazil," Journal of Comparative Economics, Elsevier, vol. 44(3), pages 657-695.
    • Handle: RePEc:eee:jcecon:v:44:y:2016:i:3:p:657-695
    DOI: 10.1016/j.jce.2015.12.001
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    Cited by:

    1. Israt Jahan & Jamie Bologna Pavlik & Ryan Blake Williams, 2020. "Is the devil in the shadow? The effect of institutional quality on income," Review of Development Economics, Wiley Blackwell, vol. 24(4), pages 1463-1483, November.
    2. Jetter, Michael & Parmeter, Christopher F., 2018. "Sorting through global corruption determinants: Institutions and education matter – Not culture," World Development, Elsevier, vol. 109(C), pages 279-294.
    3. Joshua Hall & John Levendis & Alexandre R. Scarcioffolo, 2020. "The Efficient Corruption Hypothesis and the Dynamics Between Economic Freedom, Corruption, and National Income," Journal of Developing Areas, Tennessee State University, College of Business, vol. 54(3), pages 161-175, July-Sept.
    4. Colin C. Williams, 2023. "A Modern Guide to the Informal Economy," Books, Edward Elgar Publishing, number 18668.
    5. Pavlik, Jamie Bologna & Williams, Ryan Blake, 2018. "Is the Devil in the Shadow? A Reexamination of the Relationship between Institutions and Income," 2018 Annual Meeting, February 2-6, 2018, Jacksonville, Florida 266675, Southern Agricultural Economics Association.
    6. Rojas Cama, Freddy & Emara, Noha & Trabelsi, Mohamed, 2024. "Financial inclusion and the informal sector," Research in International Business and Finance, Elsevier, vol. 70(PB).
    7. Jamie Bologna, 2017. "Contagious corruption, informal employment, and income: evidence from Brazilian municipalities," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 58(1), pages 67-118, January.
    8. Cordelia Onyinyechi Omodero, 2020. "Taxation Income, Graft and Informal Sector Operations in Nigeria in Relation to Other African Countries," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(2), pages 163-172, April.
    9. Serdar Acun, 2021. "Türkiye’de Ücretlilerin Kayıtlı Çalışma Olasılığını Belirleyen Faktörlerin Analizi," Journal of Social Policy Conferences, Istanbul University, Faculty of Economics, vol. 0(80), pages 423-450, June.
    10. Salinas, Aldo & Ortiz, Cristian & Changoluisa, Javier & Muffatto, Moreno, 2023. "Testing three views about the determinants of informal economy: New evidence at global level and by country groups using the CS-ARDL approach," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 438-455.
    11. Atangana Ondoa Henri & Seabrook Arthur Mveng, 2022. "Did state antiquity matter for the size of the informal economy?," Economics of Governance, Springer, vol. 23(2), pages 115-131, June.
    12. Masoud Khodapanah & Zahra Dehghan Shabani & Mohammad Hadi Akbarzadeh & Mahboubeh Shojaeian, 2022. "Spatial spillover effects of corruption in Asian countries: Spatial econometric approach," Regional Science Policy & Practice, Wiley Blackwell, vol. 14(4), pages 699-717, August.

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    More about this item

    Keywords

    Corruption; Informal economy; Income levels; Growth;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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