The Impact of Economic Factors on the Employment Rate in the Informal Sector: Regional Aspect

Abstract

The article attempts to estimate the impact of economic factors on the employment rate in the informal sector among Russian federal subjects based on the dynamic model. To make calculations the authors used panel data on federal subjects. All subjects were divided into 3 groups based on the rate of employment in the informal sector in 2015: first group (19 subjects) – regions with minimal employment rate, second (39) – average employment rate, third (19) – maximal employment rate. The authors used the following factors for assessment: demand factors – income level in the region, vacancies; supply factors – unemployment or characteristic of employment; institutional factor – level of taxation. Based on the calculations the authors make following conclusions. The most impactful factors are demand-based. The negative connection between GRP per capita and the informal sector is statistically confirmed. The increase in supply of work positions in the formal sector decreases the rate of employment in the informal sector, which is especially important for the third group of regions with the maximal level of informal employment that have ‘compelled entrepreneurship’. The article also statistically confirms the high inertia of rate of the employed in the informal sector

Keywords

• employment in the informal sector
• economic factors
• dynamic panel model
• labor demand
• labor supply
• institutional factors
• Russian federal subject