Title: Tackling informal employment in developing and transition economies: a critical evaluation of the neo-liberal approach

Authors: Colin C. Williams

Addresses: Management School, University of Sheffield, Conduit Road, Sheffield S10 1FL, UK

Abstract: This paper evaluates critically the argument of neo-liberals that informal employment is a result of high taxes, public sector corruption and too much state interference in the free market and that the consequent solution is to reduce taxes, public sector corruption and the regulatory burden via minimal state intervention. Comparing International Labour Organization data on the cross-national variations in the prevalence of informal employment with the variables levels of tax rates, corruption and state intervention across 41 developing and transition economies, little support is found for the neo-liberal approach. Instead, lower (not higher) levels of informal employment are found to be associated with higher levels of regulation and state intervention, resulting in a call for more, rather than less, regulation and state intervention to protect workers in developing and transition economies. The theoretical and policy implications are discussed.

Keywords: development economics; economic development; informal economy; shadow economy; underground sector; emerging economies; informal employment; developing countries; neo-liberalism; tax rates; corruption; regulation; state intervention; worker protection.

DOI: 10.1504/IJBG.2015.068619

International Journal of Business and Globalisation, 2015 Vol.14 No.3, pp.251 - 270

Received: 20 Mar 2014
Accepted: 12 Aug 2014

Published online: 31 Mar 2015 *

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