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A Tale of Two Sectors: The Formal and Informal Sectors in India
Working paper, Research brief
Pradeep Srivastava, Urjit Patel
December 1991 |
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| This paper presents an aggregative analysis of the informal sector in India. The hitherto ignored informal sector in developing societies is increasingly acquiring a central role in new thinking about development strategies. The study investigates the underlying data generating processes in terms of common stochastic trends using a macroeconometric framework related to real business cycle theory. Under appropriate assumptions regarding aggregation, the paper analyses the behavior of the formal and informal sectors in India in terms of their intrinsic conditional distribution properties as well as the relationships of their data generating mechanisms with respect to each other and several government related policy variables. In addition to highlighting the distinctively different characteristics of the informal sector, the results obtained have important policy implications for developing economies. The results also raise serious questions about abstracting from institutional aspects of development. |
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| Last updated on: 12/19/2006 |
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