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<p>We extend an endogenous general-equilibrium growth model to examine how informality shapes technological-knowledge bias, economic growth, and inequality. In the model, the skill premium arises from a technological-knowledge bias toward skilled labor, rooted in their higher productivity and lower propensity to operate informally. Calibrated simulations show that informality among unskilled workers depresses growth and shifts tasks toward skilled labor, while informality among skilled workers primarily erodes R&amp;D efficiency. Because informality reallocates labor from the formal to the informal sector, it alters task allocation, weakens innovation incentives, and amplifies the skill premium. Policy experiments indicate that reducing informality, enhancing R&amp;D efficiency, and upgrading workforce skills raise growth and can mitigate inequality. By linking informality to the evolution of technological knowledge, the paper integrates the shadow economy into growth theory and provides policy guidance for balanced, equitable development.</p>

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Effects of the informal sector on wages, sectoral competitiveness and economic growth

  • 期刊论文

  • 发表日期：

    2025年12月4日

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  • Óscar Afonso,
  • Ana Maria Bandeira

摘要

We extend an endogenous general-equilibrium growth model to examine how informality shapes technological-knowledge bias, economic growth, and inequality. In the model, the skill premium arises from a technological-knowledge bias toward skilled labor, rooted in their higher productivity and lower propensity to operate informally. Calibrated simulations show that informality among unskilled workers depresses growth and shifts tasks toward skilled labor, while informality among skilled workers primarily erodes R&D efficiency. Because informality reallocates labor from the formal to the informal sector, it alters task allocation, weakens innovation incentives, and amplifies the skill premium. Policy experiments indicate that reducing informality, enhancing R&D efficiency, and upgrading workforce skills raise growth and can mitigate inequality. By linking informality to the evolution of technological knowledge, the paper integrates the shadow economy into growth theory and provides policy guidance for balanced, equitable development.