Informal economy : development and distributional impacts

In combining empirical and theoretical approaches, this thesis examines the development and distributional impacts of the informal economy. The first chapter provides a cross-country study providing new estimates of the evolution of the informal sector and analyzes how informality affects convergence between countries and changes in the world distribution of income. The second chapter characterizes the composition of the formal and informal sectors, and analyzes how the earnings structure is affected by informal activities. The third chapter proposes a structural, two sector model with labor market frictions. The model is calibrated on each province of the DRC and used to analyze the effectiveness of different types of development policies in the presence of a large informal sector. Overall, the thesis shows that accounting for the informal output revises downward the cross-country income differentials and the level of inequality without, however, significantly affecting the mobility of economies within the world distribution of income. In a context of developing countries, the labor market consists of different sectors that are heterogeneous across them when it comes to earnings. Furthermore, when higher-paid and lower paid sectors are concerned, the labor market provides an "informal employment earning premium" to some workers of the lower-paid sectors who, given their characteristics, would not earn more in the higher-paid sectors. When analyzing development policies, the thesis quantifies a high level of complementarity between them, identify o-ring patterns of spatial inequality and shed light on the role of labor market frictions in a context of a developing country. Results show that spatial inequalities are mostly determined by technological disparities, reflecting both endowment in mineral resources, geographic position and institutional quality. A development policy that disregards the situation of the informal sector has low or even detrimental effects on inequality and extreme poverty.(ECGE - Sciences économiques et de gestion) -- UCL, 202