Informality in Russia A Survey of Recent Research by the Centre for Labour Market Studies Fabián Slonimczyk ICEF-Higher School of Economics, Moscow Georgia Project Kick-Off Workshop. Bonn, November 2011.
Finished Work Vladimir Gimpelson and Anna Zudina. “Informals” in the Russian Economy: How Many And Who Are They? HSE WP Series “Labour Markets in Transition” , 6, 2011. Fabián Slonimczyk. The Effect of Taxation on Informal Employment: Evidence from the Russian Flat Tax Reform. HSE WP Series “Labour Markets in Transition” , 5, 2011.
Work in Progress • Earnings in the Formal and Informal Sectors • Informality and Participation in the Pension System • Self-employment in the CIS Countries • Informality and Subjective Well-being: Are Informal Workers Less Happy? • Does Increasing the Minimum Wage Raise Informality?
“Informals” in Russia: Main Findings 1 The relative size of the informal sector has been growing gradually but steadily 2 Most dynamic component is informal employees 3 Self-employment is a stable small percentage of the LF 4 Informality in Russia has strong seasonal component 5 Informality increased pari-passu with GDP per capita 6 Young and uneducated informals are at risk 7 Informals concentrated in services and agriculture
Informal Sector Size: Rosstat Administrative Data 80.0 70.0 60.0 50.0 40.0 All Employed (Labor Resources Balance Method) 30.0 All Employed in Organizations All Employed in Large and Medium Enterprises 20.0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Figure: Employment (millions of individuals)
Informal Sector Estimates 50.0 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 Employed in Small Firm or Un-incorporated Sector Employed in Un-incorporated Sector 5.0 Employed in Informal Sector (LFS) 0.0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Figure: Informality as a Percentage of Employed LF
Informal Sector Structure 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Employee at Formal Enterprise, Firm or Organization Without Registration Family Worker Employee for Private Individual Entrepreneur Employee in Rural Production Without Registration Registered Entrepreneur Without Forming a Legal Entity Self-Employed Figure: Informal Employment in Main Job (millions of individuals)
Cyclicality of Informal Sector 20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 Informally Employed 4.0 Unemployed 2.0 0.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Figure: Informality as a Percentage of EAP
Composition: Gender, Urban-Rural 30.0 25.0 20.0 15.0 10.0 5.0 Males Females Urban Rural 0.0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Figure: Informality for Males-Females, Urban-Rural
Composition: Age 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 15-19 20-29 30-39 40-49 50-59 60-72 0.0 1999 2000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Figure: Informality by Age Group
Composition: Education 60.0 50.0 40.0 30.0 20.0 10.0 0.0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 College Degree Incomplete College Interm Vocational Training Basic Vocational Training Secondary (HS Complete) Secondary (without HS) Elementary or None Figure: Informality by Education Level
Composition: Occupation 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Managers, Supervisors, Leaders of Gov Specialist High Qualifications Specialist Medium Qualifications White Collar Occupations Service Workers Skilled Workers in Agriculture Skilled Workers in Manuf and Construction Operators, Machinists, Assemblers Unskilled Occupations Figure: Informality by Occupation Group
Multinomial Logit: Age Group Marginal Effect (%) 8 8 7 7 6 6 5 5 2000 4 4 2004 3 3 2008 2 2 1 1 0 0 -1 -1 -2 -2 15-19 20-29 30-39 40-49 50-59 60-72 15-19 20-29 30-39 40-49 50-59 60-72 Informal Employees Self-Employed/Entrepreneur
Multinomial Logit: Education Marginal Effect (%) 12.5 12.5 10 10 2000 7.5 7.5 2004 5 5 2008 2.5 2.5 0 0 -2.5 -2.5 Self-Employed/Entrepreneur Informal Employees
Multinomial Logit: Occupation Marginal Effect (%) ISCO_1 2 3 4 5 6 7 8 9 20 0 18 -1 16 14 -2 12 -3 10 -4 8 -5 6 4 -6 2 -7 0 2000 2004 2008 ISCO_1 2 3 4 5 6 7 8 9 -8 Informal Employees Self-Employed/Entrepreneur
The ‘Flat’ Tax Reform • In 2001, Russia introduced a tax reform that drastically reduced taxation levels • But lower income brackets were mostly unaffected: control group • The effect of the reform estimated using a differences-in-differences strategy • Other aspects of the reform make it a good quasi-experiment • Little or no room for anticipation effects • No specific incentives to misreport income around the threshold • But not perfect, since treatment is defined based on income bracket
The ‘Flat’ Tax Reform • In 2001, Russia introduced a tax reform that drastically reduced taxation levels • But lower income brackets were mostly unaffected: control group • The effect of the reform estimated using a differences-in-differences strategy • Other aspects of the reform make it a good quasi-experiment • Little or no room for anticipation effects • No specific incentives to misreport income around the threshold • But not perfect, since treatment is defined based on income bracket
The ‘Flat’ Tax Reform • In 2001, Russia introduced a tax reform that drastically reduced taxation levels • But lower income brackets were mostly unaffected: control group • The effect of the reform estimated using a differences-in-differences strategy • Other aspects of the reform make it a good quasi-experiment • Little or no room for anticipation effects • No specific incentives to misreport income around the threshold • But not perfect, since treatment is defined based on income bracket
The ‘Flat’ Tax Reform • In 2001, Russia introduced a tax reform that drastically reduced taxation levels • But lower income brackets were mostly unaffected: control group • The effect of the reform estimated using a differences-in-differences strategy • Other aspects of the reform make it a good quasi-experiment • Little or no room for anticipation effects • No specific incentives to misreport income around the threshold • But not perfect, since treatment is defined based on income bracket
The ‘Flat’ Tax Reform • In 2001, Russia introduced a tax reform that drastically reduced taxation levels • But lower income brackets were mostly unaffected: control group • The effect of the reform estimated using a differences-in-differences strategy • Other aspects of the reform make it a good quasi-experiment • Little or no room for anticipation effects • No specific incentives to misreport income around the threshold • But not perfect, since treatment is defined based on income bracket
The ‘Flat’ Tax Reform • In 2001, Russia introduced a tax reform that drastically reduced taxation levels • But lower income brackets were mostly unaffected: control group • The effect of the reform estimated using a differences-in-differences strategy • Other aspects of the reform make it a good quasi-experiment • Little or no room for anticipation effects • No specific incentives to misreport income around the threshold • But not perfect, since treatment is defined based on income bracket
The ‘Flat’ Tax Reform • In 2001, Russia introduced a tax reform that drastically reduced taxation levels • But lower income brackets were mostly unaffected: control group • The effect of the reform estimated using a differences-in-differences strategy • Other aspects of the reform make it a good quasi-experiment • Little or no room for anticipation effects • No specific incentives to misreport income around the threshold • But not perfect, since treatment is defined based on income bracket
The Data • The Russian Longitudinal Monitoring Survey • Rounds VIII–XVIII (1998–2009) • In typical round, 10,000 individuals in 4,000 household • The adult questionnaire contains information on up to three ‘jobs’: main job, second job, irregular remunerated activities • Special supplement on informal work (round XVIII)
The Data • The Russian Longitudinal Monitoring Survey • Rounds VIII–XVIII (1998–2009) • In typical round, 10,000 individuals in 4,000 household • The adult questionnaire contains information on up to three ‘jobs’: main job, second job, irregular remunerated activities • Special supplement on informal work (round XVIII)
The Data • The Russian Longitudinal Monitoring Survey • Rounds VIII–XVIII (1998–2009) • In typical round, 10,000 individuals in 4,000 household • The adult questionnaire contains information on up to three ‘jobs’: main job, second job, irregular remunerated activities • Special supplement on informal work (round XVIII)
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