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SEEKING RENT IN THE INFORMAL SECTOR
Author(s) -
KAR Saibal,
MANDAL Biswajit,
MARJIT Sugata,
MUKHERJEE Vivekananda
Publication year - 2020
Publication title -
annals of public and cooperative economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.526
H-Index - 37
eISSN - 1467-8292
pISSN - 1370-4788
DOI - 10.1111/apce.12253
Subject(s) - rent seeking , informal sector , language change , economics , public sector , welfare , public economics , developing country , labour economics , business , market economy , economic growth , politics , economy , political science , art , literature , law
Rent seeking within the vast informal segment of the developing world is a relatively under‐explored topic in the interface of labor market policies and public economics. Moreover, how rent seeking and corruption within the informal segment gets affected by economic reforms targeted for the formal sector is rarely discussed in the literature. This paper fills the gap. We identify conditions under which economic reform in the formal segment will increase the rate of corruption or rent seeking in the informal sector and raise the pay‐off for those involved in rent‐seeking activities. When the formal sector contracts due to reforms, rent seeking in the informal sector may increase and lower the level of welfare unconditionally. Economic reforms may increase corruption instead of reducing it, unlike standard conjectures.