The relative performance of formal and informal sectors in India

T. Ten Raa, A. Sahoo

Research output: Contribution to journalArticleScientificpeer-review

2 Citations (Scopus)

Abstract

We evaluate the relative performance of formal and informal sectors in India by looking into their productivity difference. Recognizing the intersectoral linkages in the economy, the competitive general equilibrium prices are computed; these signal the productivities. Our model synthesizes frontier analysis with the general equilibrium approach to generate shadow prices. The formal activities are found to be more productive than the informal. However, the informal services sector is as efficient as the formal one. There would be an overall productivity gain of 22% to the economy if factors were allocated to productive activities. The shadow prices from the model indicate that the formal capital and informal capital are scarce factors, while it has been the opposite for formal (regular) and informal (casual) labour. Formal labour is more productive than its informal counterpart; formal capital and informal capital are equally productive.
Original languageEnglish
Pages (from-to)151-162
JournalEconomic Systems Research
Volume21
Issue number2
Publication statusPublished - 2009

Fingerprint Dive into the research topics of 'The relative performance of formal and informal sectors in India'. Together they form a unique fingerprint.

  • Cite this