Does globalisation affect informal employment in low and lower middle income countries?

Abstract

This thesis examines whether increased globalisation causes rise in informal employment for low and lower middle income countries. Previous studies have suggested that increased globalisation does play a significant role in the level of informal employment in an economy. This thesis employs a selection of 20 low income and lower middle income countries for the period of 1990 to 2014. To achieve this, the research employs a random effects panel regression analysis by clustering over countries and using trade-based indicators for globalisation. The empirical analysis finds that while trade does exhibit a positive and significant relationship with informal employment, foreign direct investment exhibits negative and insignificant relationship to informality and trade restrictions exhibit a positive but insignificant relationship with informal employment.