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Microeconomic analysis of the informal sector-results of sample surveys.



1. INTRODUCTION

In earlier studies of the informal sector, and in particular in its association with small-scale, cottage and household manufacturing industries manufacturing industries nplindustrias fpl manufactureras

manufacturing industries nplindustries fpl de transformation

 (HM), this sector was commonly considered as economically backward, low-income and offering few possibilities for raising productive employment. Later studies, by Allal and Chutta (1982) questioned this view, and noted, in addition, that informal activities are an important source of income and employment for a large portion of the population and will remain so over a long period to come and cannot be neglected, therefore, in the design of development policies.

The recognition of the importance of this sector has not removed two major obstacles in the investigation of the sector: data and viable analytical frameworks. Additional insight in the sector requires primary data collection of an unregistered population, and developing an analytical framework for studying settings with significant institutional influences. This paper reports on the collection of primary data and on an analytical framework which were applied in a field survey of the informal sector in the context of urban areas in Pakistan. (1)

It is plausible to define the informal sector as consisting of firms at the lower end of the size continuum. However, it will be apparent in a field survey that these establishments are still highly diversified diversified (di·verˑ·s  and do include establishments which are mainly linked to the modern part of the economy, and which can be called ML, and establishments which are more of the self-sufficient type with only incidental Contingent upon or pertaining to something that is more important; that which is necessary, appertaining to, or depending upon another known as the principal.

Under Workers' Compensation statutes, a risk is deemed incidental to employment when it is related to whatever a
 links with the modern economy, which we shall call SS.

The proposition to subdivide TO SUBDIVIDE. To divide a part of a thing which has already been divided. For example, when a person dies leaving children, and grandchildren, the children of one of his own who is dead, his property is divided into as many shares as he had children, including the deceased, and the share  the surveyed establishments into two subsamples is not to be interpreted in the sense that the informal sector contains two independent circuits. On the contrary, there is a graduation Graduation is the action of receiving or conferring an academic degree or the associated ceremony. The date of event is often called degree day. The event itself is also called commencement, convocation or invocation.  between prototypes. In the Seventies and early Eighties, [Bienefeld (1987); Bose (1974); Breman (1976)], among others, argued that the informal sector must be dealt with as a coherent economic system which contains different modes of production varying in degree and graduation in their production behaviour, factor use, marketing pattern and institutional aspects. Therefore, when operationalizing a subdivision into two subgroups, the approach followed should give thought to the fact that the profiles of firms are multi-dimensional and tend to polarize po·lar·ize  
v. po·lar·ized, po·lar·iz·ing, po·lar·iz·es

v.tr.
1. To induce polarization in; impart polarity to.

2. To cause to concentrate about two conflicting or contrasting positions.
 consistently only in the extremes.

The analytical framework permits the investigation of profiles of establishments at various levels: (1) the segmental segmental /seg·men·tal/ (seg-men´t'l)
1. pertaining to or forming a segment or a product of division, especially into serially arranged or nearly equal parts.

2. undergoing segmentation.
 level as proposed above in the form of ML versus SS, (2) the city level, (3) the sector of activity, and (4) occupational level. In principle, policy intervention can be also applied at all four levels. For reasons of space this paper, however, will concentrate on the segmental level, a further examination of all levels is found in Cohen cohen
 or kohen

(Hebrew: “priest”) Jewish priest descended from Zadok (a descendant of Aaron), priest at the First Temple of Jerusalem. The biblical priesthood was hereditary and male.
 and Havinga (1984).

Before presenting the statistical and analytical framework it is worthwhile to comment on the significance of the informal sector with regard to employment and income generation. It is plausible to assume that 70 percent of the employment in manufacturing activities are taken up by household manufacturing for a country like Pakistan. In fact, applying the development characteristics of Pakistan to the cross-section curves estimated by Anderson (1982), renders such a magnitude. This percentage is confirmed by an urban Study from Guisinger and Irfan (1980) which expressed that 70 percent of the urban labour force is employed in the informal sector.

The paper will be organized as follows, ha Section 2 the distinction between the subgroup sub·group  
n.
1. A distinct group within a group; a subdivision of a group.

2. A subordinate group.

3. Mathematics A group that is a subset of a group.

tr.v.
 ML and SS will be discussed and applied. The main features of SS and ML will be presented in Section 3 along various types of indicators. More specific attention will be devoted to the efficiency indicators by means of the estimation estimation

In mathematics, use of a function or formula to derive a solution or make a prediction. Unlike approximation, it has precise connotations. In statistics, for example, it connotes the careful selection and testing of a function called an estimator.
 of production functions in Section 4. The equity indicator is highlighted in Section 5 followed by concluding remarks in Section 6.

2. DIFFERENT SEGMENTS WITHIN HM: SUBDIVISION OF TOTAL SAMPLE INTO SUB-SAMPLES

The sample survey referred to in this paper has been conducted in 1980 in four cities of Pakistan: Lahore, Karachi, Peshawar, Rawalpindi. The actual field work is divided in two parts: (1)a short screening survey of informal activities based on three questions: and (2) the elaborate sample survey based on a long questionnaire. For the screening survey, as many small-scale firms as possible were recorded in a particular area and were requested to respond according to according to
prep.
1. As stated or indicated by; on the authority of: according to historians.

2. In keeping with: according to instructions.

3.
 the following three questions:

(a) type of activity;

(b) total number of workers in firm ; and

(c) number of owner and family workers in firm.

Firms active in manufacturing not exceeding five workers and the majority of workers are owner and self-employed, are subjected to the long questionnaire. An interview took between 20 to 40 minutes. The interviews produced 806 valid responses at establishment level.

The heterogeneity het·er·o·ge·ne·i·ty
n.
The quality or state of being heterogeneous.



heterogeneity

the state of being heterogeneous.
 of the sample and its positioning between formal and informal market processes calls for the subdivision of the sample into two sub-samples. The subdivision of the sample will also help illustrate the changing profiles of establishments at the lowest size continuum of firms consistent with different phases of industrial development. At the one hand the traditional segment contains family-based firms with forward and backward linkages usually to the local consumer market. In contrast, the more formal segment has traits in common with the modern sector, this segment employs non-family labour and maintains backward and forward Adv. 1. backward and forward - moving from one place to another and back again; "he traveled back and forth between Los Angeles and New York"; "the treetops whipped to and fro in a frightening manner"; "the old man just sat on the porch and rocked back and forth all  linkages with the rest of the economy. As a result, higher income generation might be expected as well as larger diffusion diffusion, in chemistry, the spontaneous migration of substances from regions where their concentration is high to regions where their concentration is low. Diffusion is important in many life processes.  of technical and managerial information.

Placed in the historical transformation of firms, a part of the locally oriented o·ri·ent  
n.
1. Orient The countries of Asia, especially of eastern Asia.

2.
a. The luster characteristic of a pearl of high quality.

b. A pearl having exceptional luster.

3.
 SS-firms gradually transforms in outward oriented ML-firms so that both types of firms have different and similar features. Therefore a sliding scale slid·ing scale
n.
A scale in which indicated prices, taxes, or wages vary in accordance with another factor, as wages with the cost-of-living index or medical charges with a patient's income.
 of five indicators has been designed to allow a subdivision which guarantees the contrasts and similarities of features.

Table 1 lists the five indicators which are applied to separate the subgroups SS and ML. The supply side, i.e. production, is represented by indicators labelled labour, raw materials and capital. The demand side, i.e. market, is represented by the indicator labelled product, while the institutional aspects are represented by the indicator registration of establishment.

Considering first the supply side, the indicator for labour distinguishes between family-based firms and those firms with one or more non-family (wage) earner(s). The indicator raw material serves to distinguish between outward-backward relations and inward-backward relations where the outward-backward linkages are determined by the relations with wholesalers, middlemen, government agencies and the mix of all the raw material markets. The locally inward-oriented backward linkages are highlighted by the relations with farms, households and retailshops. Finally, the indicator capital displays the difference in capital investment of firms below and above the average capital investment of the total sample, i.e. 6500 Pakistani Rupees.

The indicator on demand for products differentiates between the outward and inward in·ward  
adj.
1. Located inside; inner.

2. Directed or moving toward the interior: an inward flow.

3.
 forward linkages, resp. sales of product to large and small enterprises and government agencies (outward), and sales to households and farmers (inward).

The indicator on establishment characteristics differentiates between those firms with and without a legal registration of the firm.

For each of the above five indicators threshold values are specified. An establishment falling below the threshold value is assigned tentatively to the SS segment, while an establishment falling above the threshold value is assigned tentatively to the ML segment. If an establishment is assigned twice or more times to the ML segment then it is counted as definitely belonging to the ML segment. All other establishments are then counted as belonging to the SS segment. Applying the minimum of two indicators, the subdivision results into the grouping of 153 firms (19.0 percent) in the ML-subgroup and 653 firms (81.0 percent) in the SS-group.

When looking at the discriminating dis·crim·i·nat·ing  
adj.
1.
a. Able to recognize or draw fine distinctions; perceptive.

b. Showing careful judgment or fine taste:
 ability of each indicator, one notices that the indicator of non-family worker(s) in the firm (NUMNFA) performs better than other indicators in separating the sample into two sub-samples, i.e. 109 firms are identified as ML which is the highest value in column 3, Table 1. Next in discriminating ability is the indicator relating to relating to relate prepconcernant

relating to relate prepbezüglich +gen, mit Bezug auf +acc 
 origin of the raw materials (RAWORI), followed by the indicators on sales markets (DEMMAR), legal registration (ESTREG), and finally capital investment (CAPVAL).

3. MAIN FEATURES OF THE DISTINGUISHED SEGMENTS

That the subdivision in SS and ML provides an appropriate basis to verify different profiles from SS to ML can be perceived from the empirical results presented in Table 2.

The formal nature of establishments in the ML-segment as compared to those in the SS-segment is directly perceived from the higher percentage of registration (ESTREG) and use of bookeeping records (ESTREC). Moreover, the LM-firms with their outward market orientation obtain higher demand for their products. This is counterbalanced by higher capital investment (CAPVAL) and higher total employment (LABSIZ). The higher employment necessitates recruiting non-family wage earners (LABNOF) and apprentices (LABAPP). A higher average capital labour intensity (RELINT) for ML-firms is observed. Also a higher average labour productivity (PROLAB) is realized. Since instability of demand is reported to be relatively higher by the ML-firms due to the outward orientation of the sales markets, the ML-setting is characterized char·ac·ter·ize  
tr.v. character·ized, character·iz·ing, character·iz·es
1. To describe the qualities or peculiarities of: characterized the warden as ruthless.

2.
 by an underutilization of the capital investment, which explains the lower average capital productivity (PROCAP PROCAP Protection Capability ).

This combination of a higher capital/labour intensity, a higher labour productivity and a lower capital productivity is consistent with factual evidence elsewhere. Findings on small-scale enterprises from other countries Havinga, Faiz and Cohen (1986) show that (1) small enterprises with lower level of capital endowment A transfer, generally as a gift, of money or property to an institution for a particular purpose. The bestowal of money as a permanent fund, the income of which is to be used for the benefit of a charity, college, or other institution.  per worker tend to realize a lower productivity of labour than the larger more capital intensive enterprises, and (2) small enterprises with lower level of investment per worker tend to achieve a higher productivity of capital than do larger and more capital intensive enterprises.

The higher instability of demand, both structural (DEMDES DEMDES Demurrage/Despatch Money (owed when chartered vessel unloads cargo faster/slower than forseen) ) and conjunctural (DEMDEM), is also revealed by the higher turnover of skilled (LABTSK) and unskilled (LABTUN) workers. The higher level of uncertainty of demand could also explain the shift in the nature of work to higher incidence of payment (LABPAY) on the number of pieces produced instead of fixed appointment.

Illustrative il·lus·tra·tive  
adj.
Acting or serving as an illustration.



il·lustra·tive·ly adv.

Adj. 1.
 of the effect of outward orientation is both the increasing difficulty in obtaining raw materials (RAWDIF) outside the district (RAWORI) as well as the increased requirement for delivery licences of raw materials (RAWLIC). Similarly, a larger part of the technical know-how (TECHNO techno

electronic dance music that first appeared in the U.S. in the 1980s and became globally popular in the 1990s. It originated with Detroit deejay-producers who, inspired by European electro-pop, underlaid dreamy synthesizer melodies with rapid electronic rhythms.
) is diffused dif·fuse  
v. dif·fused, dif·fus·ing, dif·fus·es

v.tr.
1. To pour out and cause to spread freely.

2. To spread about or scatter; disseminate.

3.
 through suppliers and government agencies as compared to family and friends, leading to a widening of knowledge regarding applicability of mechanized mech·a·nize  
tr.v. mech·a·nized, mech·a·niz·ing, mech·a·niz·es
1. To equip with machinery: mechanize a factory.

2.
 production (TECAPP). Furthermore, the evidence of more outward oriented sales markets (DEMMAR) might explain the higher tendency towards sales on credit (DEMCRE) and sales from stocks (DEMORD). At least, the latter indicates the tendency towards larger working capital. Incidentally, almost all firms surveyed have connections to the electric grid system (ENRELE).

For the owner of the ML-firms compared to the SS-firms, one observes on average 66 percent higher income (OWOINC) and 2 years more education (OWOEDU). Also he is more aware of already existing possibilities of government assistance (OWSUNO). With respect to this assistance he has a positive attitude towards paying for this assistance (OWSPAY). More competition (OWSCOM)and overcapacity o·ver·ca·pac·i·ty  
n.
Too great a capacity for production of commodities or delivery of services in relation to actual need: the problem of overcapacity in many large industries. 
 (OWSCAP) are also felt by the owner of the ML-firm, but he is still more optimistic op·ti·mist  
n.
1. One who usually expects a favorable outcome.

2. A believer in philosophical optimism.



op
 about future development (OWSFUT). Possibly due to these better future expectations, he expresses a higher intention to expand (OWSEXP) his production than the owner of a SS-firm.

Finally, that the above-mentioned instabilities at the demand side also result in vulnerability at the supply side can be clearly noted when comparing the ML and SS profiles of the encountered problems at the time of the establishment of the firm and at present, in Tables 3 and 4. Owners of SS-firms perceive the lack of finance and demand both at start and at present as the major problems. The outward orientation of ML-firms, however, results in a different perception of problems. The lack of finance is again mentioned for the initial phase but also the lack of skilled labour and raw materials next to the lack of demand are significant. These problems tend to persist till present although a changing hierarchy can be observed: in particular with regard to the lack of raw materials.

4. PRODUCTION RELATIONSHIPS IN HOUSEHOLD MANUFACTURING

There is a rational urge to formalize some of the foregone fore·gone
v.
Past participle of forego1.

adj.
Having gone before; previous.

Usage Note: The word foregone has recently developed a new meaning as a truncation of the phrase
 profile descriptions in systematic cause-effect functions. The production function is a suitable framework for studying capital and labour use. Parameters of the production function give the marginal productivities of additional uses of labour and capital.

While various forms of production functions can be specified, the Cobb Douglas production function is most oftenly used and suffices the purpose in the present context.

Several specifications of the Cobb-Douglas function have been estimated. In the first place, we have

ln [VAL 1. VAL - Value-oriented Algorithmic Language. J.B. Dennis, MIT 1979. Single assignment language, designed for MIT dataflow machine. Based on CLU, has iteration and error handling, lacking in recursion and I/O. "A Value- Oriented Algorithmic Language", W.B. .sub.i] = A + a.ln [LABSIZ.sub.i] + b.ln [CAPITAL.sub.i] + [u.sub.i]

where for each firm i, VAL is the total net value added Value Added

The enhancement a company gives its product or service before offering the product to customers.

Notes:
This can either increase the products price or value.
, LABSIZ is total employment, CAPITAL is total fixed capital at historical prices. The coefficients a and b are factor elasticities and u is the error term. In addition, the age and educational characteristics of workers and owners have been introduced. OWED is formal education of owner, OWEX is the age of the owner as a proxy for experience of the owner, AVED AVED Ministry of Advanced Education
AVED Ataxia with Vitamin E Deficiency (neurodegenerative disorder)
AVED Anti-Virus Emergency Discussion (Group)
AVED Avionic Engineering Division
 is the average formal education of workers, A VEX is the average age of workers as a proxy for average experience of workers.

The underlying premise for differentiating between education and experience is based on the hypothesis that in HM with its low level of organization and management, experience is more of direct use due to the improvement of skills and the effects on technological change than formal schooling.

The distinction between the variables of the owner and workers has been made in order to consider the fact that the nature of production in HM is such that it does not reveal clear signs of division of labour. Therefore, the average accumulation of education and in particular experience has more explanatory ex·plan·a·to·ry  
adj.
Serving or intended to explain: an explanatory paragraph.



ex·plan
 value for the differences in value added than the level of education and skills (experience) of the owner.

Table 5 gives the estimations of the alternative functions for the total sample and for ML and SS.

It is apparent that the statistical performance of the regressions is rather poor in terms of the explained variances ([R.sup.2]), although they increase slightly with the. introduction of the measure of education and experience in the function.

The poor performance can be due to the manner of estimation of the capital stock: for instance, by taking the historical price of capital one does not differentiate between the marginal capital productivities of different vintages: while the considerable mixture of capital equipment found in HM may obstruct a standardized valuation of that capital.

A more significant explanation lies in the already observed fact that firms in HM with high and sometimes redundant capital and without a correspondingly high total value added tend to reduce the size of the estimated coefficients of the capital elasticity. In many cases the coefficients of capital elasticity are low and insignificant or significant only at 20 percent level, not only for the total sample, but also for the subsamples of ML and SS. It was not possible to make allowance for the degree of capital underutilization.

Coefficients of the labour elasticity show higher rates for the SS-segment than for the ML-segment ranging from .55 to .67 and .33 to .40 respectively, for alternative specifications. The results are significant (at least at 10 percent level) and stable.

As regards the educational variables, it is observed that experience is found to be more important than formal education, for both the owner and the average worker given the present level of organization and technology of HM.

5. DISTRIBUTIONAL ASPECTS IN HOUSEHOLD MANUFACTURING

In the development process of the HM, limited policy instruments are available to transfer efficiency gains from gainers to losers. The harmonization har·mo·nize  
v. har·mo·nized, har·mo·niz·ing, har·mo·niz·es

v.tr.
1. To bring or come into agreement or harmony. See Synonyms at agree.

2. Music To provide harmony for (a melody).
 of equity and efficiency, and for that matter the limitation of trade-offs between equity and efficiency should be appreciated by policy-makers. In case conflicting situation arise structural adjustments should be contemplated to allow balanced growth.

Two measures of income inequality inequality, in mathematics, statement that a mathematical expression is less than or greater than some other expression; an inequality is not as specific as an equation, but it does contain information about the expressions involved.  have been constructed. The first measure, x, has been labelled average personal income inequality which relates average income of total workers to the average income of the owners. This measure has been appropriately modified by considering the number of dependents supported by a given income, which leads to the second measure, y, labelled the average family inequality.

The application of the two ratios is taken up in Table 6. For ratio x, one obtains a value of 57 percent for ML and 76 percent for SS, hence, the income inequality between the workers and owners is more pronounced for ML than SS. Yet, when we introduce the number of dependents, the modified ratio, y, becomes 93 percent for ML and 107 percent for SS. So, the distribution of family income after considering dependents, is highly equal in both the ML and SS subsamples.

Having looked at the average personal and family income inequalities This page lists Wikipedia articles about named mathematical inequalities. Pure mathematics
  • Abel's inequality
  • Barrow's inequality
  • Berger's inequality for Einstein manifolds
  • Bernoulli's inequality
  • Bernstein's inequality (mathematical analysis)
 within ML and SS, it is interesting to illustrate these average income inequalities between ML and SS, Table 7. The inequality ratio between the average owners of SS and ML is 61 percent while the inequality between the average workers of SS and ML is 81 percent. When multiplying straightforward with the dependency ratios of the average workers of ML and SS and the average workers of ML and SS, the ratio of the average family income inequality between the average owners of SS and ML is still 61 percent and between the average workers of SS and ML gives 71 percent. Hence, the average family income inequality between workers of ML and SS is larger than the average personal income inequality between workers of ML and SS.

Although the income inequality between the owners of ML and SS remains the same with or without dependents, we note an increase in inquality if the element of other jobs elsewhere is introduced. Namely, the share of owners with other jobs elsewhere in ML is larger than in SS, i.e., 14.2 percent and 8.7 percent, respectively.

6. CONCLUDING REMARKS

Empirical evidence shows the existence of significant segmentation of establishments in the informal sector. The paper has developed a viable analytical tool to distinguish firms belonging to an inward oriented and self-sufficient segment from an outward market oriented segment. Such a segmentation approach will facilitate adopting differential policy-making for each segment and, eventually, in anticipation of a transformation of profiles from one type to another.

The data base at hand does not permit analysis of the mobility pattern of firms or individuals between the two segments. Elaborations in this area of research are found elsewhere Havinga, Faiz and Cohen (1986).

Comments on "Microeconomic mi·cro·ec·o·nom·ics  
n. (used with a sing. verb)
The study of the operations of the components of a national economy, such as individual firms, households, and consumers.
 Analysis of the Informal Sector--Results of Sample Surveys"

The paper entitled en·ti·tle  
tr.v. en·ti·tled, en·ti·tling, en·ti·tles
1. To give a name or title to.

2. To furnish with a right or claim to something:
 "Micoreconomic Analysis of the Informal Sector - Results of Sample Surveys" by I. Havinga and S.I. Cohen makes a very important contribution to the very limited empirical research Noun 1. empirical research - an empirical search for knowledge
inquiry, research, enquiry - a search for knowledge; "their pottery deserves more research than it has received"
 available on the informal sector in Pakistan. It is a useful attempt to capture internal differentiation within the informal sector which so far has mostly been studied as a homogeneous The same. Contrast with heterogeneous.

homogeneous - (Or "homogenous") Of uniform nature, similar in kind.

1. In the context of distributed systems, middleware makes heterogeneous systems appear as a homogeneous entity. For example see: interoperable network.
 unit. Here it should be emphasised that the paper refers only to manufacturing activities in the informal sector and excludes the major bulk of informal sector activity in construction, transport, trade and services.

The authors subdivide manufacturing activity in the informal sector into two distinct groups on the basis of a set of criteria including employment size, level of capital investment, and contacts with the modern sector. The SS or self-sufficient segment of the informal economy is shown to comprise of traditional, family-based firms characterised by greater labour intensity and higher capital-output ratios as compared to the ML (mainly linked) sector which is more closely connected to the modern sector of the economy. The latter segment is shown to have higher average earnings and a greater proportion of non-family workers.

Unfortunately, the authors do not present the results of the survey on some other important features of the two sectors. Thus, very little is said about the differences in the two sectors with respect to technology used, the quality of products produced, and the rate of capital accumulation Most generally, the accumulation of capital refers simply to the gathering or amassment of objects of value; the increase in wealth; or the creation of wealth. Capital can be generally defined as assets invested for profit. . Information provided in the survey on changes in the level of economic activity could also have been used to identify informal sector activities which have been expanding.

Moreover, some characteristics of the two sub-sectors mentioned by the authors, such as outward-backward linkages, inward-backward linkages, structural and conjectural con·jec·tur·al  
adj.
1. Based on or involving conjecture. See Synonyms at supposed.

2. Tending to conjecture.



con·jec
 instability of demand need further clarification. A more disaggregated Broken up into parts.  analysis by activities could be used to illustrate these backward and forward linkages.

It would also have been useful to elaborate on the nature of the relationship between the ML units and the modern sector of the economy. Such linkages have been the source of considerable controversy in development literature where in a number of instances they have been shown to be exploitative and extremely unfavourable for the small firms. The system of subcontracting and outwork believed to have expanded significantly in recent years in Pakistan is seen as an important source of such contact between the two sectors. It would be interesting to know the extent of subcontracting work undertaken by firms in the sample.

The findings of the paper indicate marked differentials in earnings in the two sectors with the average wage in the SS sector being considerably below that in the ML sector. The earnings differential may partly be explained by a larger proportion of registered firms which are covered by government legislation in the ML group. Since the authors have not controlled for skill or educational levels the income difference may merely reflect a higher skill or educational content of the labour employed in ML units. Hence, it is not clear whether lower wages reflect differences in the labour market processes or in the personal characteristics of the workers. Further, earnings are only one aspect of employment another aspect of equal importance is job security. In this context the higher turnover of skilled and unskilled workers in the more modern sector needs to be explained.

Another distributional aspect of the informal sector which needs to be mentioned is the fact that it provides low-cost services and products which are directed mainly to the needs of low and middle-income groups.

In terms of the analytic an·a·lyt·ic or an·a·lyt·i·cal
adj.
1. Of or relating to analysis or analytics.

2. Expert in or using analysis, especially one who thinks in a logical manner.

3. Psychoanalytic.
 usefulness of the classification the authors see the two sets of units as placed on different points on the continuum of productive activity whereby the SS units are in the process of transformation. However, it is not explained how these self-sufficient type of firms are supposed to transform into the more dynamic firms linked to the modern sector or the type of policy interventions required to bring about the transformation. From the policy point of view the division of the informal sector into these two distinct groups does not serve any useful function since instead of identifying informal business with greater growth potential or the right qualities for development, the authors conclude by recommending supportive policies across the board for both the SS and ML firms.

Shahnaz Kazi

Pakistan Institute of Development Economics Pakistan Institute of Development Economics (PIDE) is a think tank in Islamabad, Pakistan.

Pakistan Institute of Development Economics was established at Karachi in 1957 and in 1964 accorded the status of an autonomous research organisation by the Government of Pakistan.
, Islamabad

REFERENCES

Allal, M., and E. Chutta (1982). Cottage Industries and Handicrafts: Some Guide lines for Employment Promotion. Geneva Geneva, canton and city, Switzerland
Geneva (jənē`və), Fr. Genève, canton (1990 pop. 373,019), 109 sq mi (282 sq km), SW Switzerland, surrounding the southwest tip of the Lake of Geneva.
: ILO ILO
abbr.
International Labor Organization

Noun 1. ILO - the United Nations agency concerned with the interests of labor
International Labor Organization, International Labour Organization
.

Anderson, D. (1982). "Small Industry in Developing Countries: Some Issues". Washington, D.C. : The World Bank. (World Bank Staff Working Paper No. 518)

Bienefeld, M. (1987). "The Informal Sector and Pheripheral Capitalism: The Case of Tanzania". Institute of Development Bulletin. Vol. 6, No. 3.

Bose, A. N. (1974). The Informal Sector in the Calcutta Metropolitan Economy. Geneva: ILO.

Breman, J. C. (1976). "A Dualistic Labour System?". Economic and Political Weekly.

Cohen, S. I., and I. Havinga (1984). Profiles of Informal Employment in Urban Area; A Sample Survey of Small-size Household Manufacturing in Main Urban Areas in Pakistan. Islamabad: Manpower Division.

Cohen, S. I., and K. van Elk (1984). Non-Farm Employment in Rural Pakistan: A Pilot Survey of 25 Villages. Islamabad: Manpower Division.

Guisinger, S., and M. Irfan (1980). "Pakistan's Informal Sector". Journal of Development Studies. Vol. 6, No. 4.

Havinga, I., Faiz M. and S. I. Cohen (1986). "Intergenerational in·ter·gen·er·a·tion·al  
adj.
Being or occurring between generations: "These social-insurance programs are intergenerational and all
 Mobility and Long Term Socio-economic Change in Pakistan". Pakistan Development Review. Vol. XXV, No. 4.

(1) A full report is found in Cohen and Havinga (1984). At this point it is important to refer to a similar study of a sample survey of non-farm employment in rural areas Cohen and van Elk (1984).

S. I. COHEN and IVO IVO In View Of
IVO International Virtual Observatory
IVO In Vicinity Of
IVO Infovision Optronics (China)
IVO Installation Voting Officer
IVO Internation Volume Offering (IBM; global computer discount) 
 C. HAVINGA *

* The authors are respectively, Professor of Economics and Senior Lecturer senior lecturer
n. Chiefly British
A university teacher, especially one ranking next below a reader.
 at the Erasmus University Erasmus University Rotterdam is a university in the Netherlands, located in Rotterdam. The university is named after Desiderius Erasmus Roterodamus, a 15th century humanist and theologian. , Rotterdam.
Table 1
Indicators, Threshold Values and Results of the Subdivision of
Household Manufacturing (HH) in the Mainly Linked (ML) and the
Substantially Self-contained (SS) Subgroup

                                         Results of the Subdivision
                                          into Two Samples Number of
                                         Units Falling in Each Sample

Indicator and Threshold Value           Substantially    Mainly linked
                                        Self-contained        (ML)
                                             (SS)

Supply
  1. Labour (NUMFA)
     Number of Non-family Workers:
     (a) Zero 9                              503               44
     (b) One or More                         150              109
  2. Raw Material (RAWORI)
     Supply of Raw Materials from:
     (a) Inward Source                       374               43
     (b) Inward and Outward Sources           46               88
  3. Capital (CAPVAL)
     Fixed Capital Investment:
     (a) Less than Rs 6,500                  165               36
     (b) Equal or More than Rs 6,500          43               41
Demand
  4. Product (DEMMAR)
     Sales of Products to:
     (a) Inward Oriented Markets             480               71
     (b) Inward and Outward Oriented
         Markets                              62               76
Establishment
  5. Registration (ESTREG)
     Whether Enterprise is Legally
       Registered:
     (a) No                                  578               87
     (b) Yes                                  75               66
Total Selection Based on Two or
  More assigned Indicators to ML             653              153

Table 2
Segmental Profiles of MI, and SS

              LABOUR
              LABSIZ      LABFAM      LABNOF      LABAPP

SUB-
GROUP            (%)           (%)         (%)         (%)
1. ML            3.2            60          40          10
2. SS            2.5            90          10           0
3. TOTAL         2.6            80          20           0

              LABPAY      LABTON      LABTSK

SUB-
GROUP            (%)         (%)         (%)
1. ML           75.2         4.2        23.3
2. SS           58.6         2.8        17.0
3. TOTAL        63.1         3.1        18.3

              CAPITAL        RAW MATERIALS
              CAPVAL      RAWLIC      RAWORI      RAWDIF

SUB-
GROUP            (%)         (%)         (%)         (%)
1. ML           53.2        22.6        64.2        30.2
2. SS           20.7        16.8         9.1        21.2
3. TOTAL        29.5        17.9        20.9        23.1

              ENERGY
              ENRELE

SUB-
GROUP            (%)
1. ML           93.9
2. SS           87.5
3. TOTAL        88.8

                   TECHNOLOGY
              TECAPP      TECKNO      RELINT      PROCAP

SUB-
GROUP            (%)         (%)         (%)         (%)
1. ML           64.1        61.0      5296.5         2.7
2. SS           41.7        40.1      2151.4         4.3
3. TOTAL        46.4        44.4      3015.4         3.5

              PROLAB

SUB-
GROUP            (Rs)
1. ML        14214.5
2. SS         9333.3
3. TOTAL     10674.3

              DEMAND
              DEMDEM      DEMDES      DEMCRE      DEMORD

SUB-
GROUP            (%)         (%)         (%)         (%)
1. ML           71.8        41.1        26.1        78.6
2. SS           64.5        30.3        24.3        82.7
3. TOTAL        66.0        32.4        24.7        81.8

                 ESTABLISHMENT
              ESTREG      ESTREC

SUB-
GROUP            (%)         (%)
1. ML           43.1        43.9
2. SS           11.5        30.0
3. TOTAL        17.5        32.6

                OWNER OBJECTIVE
              OWOEDU      OWOING

SUB-
GROUP         (Years)      (Rs)
1. ML            6       20240.7
2. SS            8       12436.0
3. TOTAL         7       13999.2

               OWNER SUBJECTIVE
              OWSFUT      OWSEXP      OWSCOM      OWSCAP

SUB-
GROUP            (%)         (%)         (%)         (%)
1. ML           62.6        48.9        67.1        84.4
2. SS           60.4        41.5        66.6        81.3
3. TOTAL        60.9        42.9        66.7        81.9

              OWSUNO

SUB-
GROUP            (%)
1. ML           20.0
2. SS            7.6
3. TOTAL        10.1

Table 3
Substantially self-contained (SS): Hierarchy of Encountered Problems
at Start and Present. Percentage of Firms Facing Problems

Type of Problem                   At Start    At Present

Some Problem(s), of which            63.0         63.6
Lack of Finance                      44.6         39.5
Lack of Demand                       33.8         37.2
Lack of Raw Materials                 6.8         11.6
Lack of Skilled Labour                5.1          5.7
Lack of Suitable Location             4.1          4.2
Hardship of Work                      1.6          2.7
Inavailability of Equipment           0.0          2.3
Not Specified                         3.5          6.9

Table 4
Mainly Linked (ML): Hierarchy of Encountered Problems at Start
and Present. Percentages of Firms Facing Problems

Type of Problem                   At Start    At Present

Some Problem(s), of which            57.6         71.7
Lack of Finance                      41.1         27.4
Lack of Demand                       17.1         20.7
Lack of Skilled Labour               20.6         14.2
Lack of Raw Materials                11.8         29.7
Inavailability of Equipment           1.4          1.1
Hardship of Work                      1.4          1.1
Lack of Suitable Location             0.0          0.0
Not Specified                         5.9          5.4

Table 5
Estimates of Aggregate Production Function of HM

        Constant       LAB         CAP        OWED        OWEX

Total     6.49         .61         .10
                      (.11)       (.04)

          6.52         .61         .10        -.03 (c)     .0002 (c)
                      (.11)       (.04)       (.09)       (.18)

          4.81         .71         .09
                      (.21)       (.04)

ML        7.14         .35 (a)     .08 (a)
                      (.21)       (.06)

          7.14         .33 (b)     .06 (c)     .13 (c)    -.22 (c)
                      (.21)       (.06)       (.17)       (.33)

          6.07         .40 (a)     .07 (c)
                      (.23)       (.06)

SS        6.52         .55         .06 (c)
                      (.13)       (.04)

                       .57         .06 (b)    -.08 (c)     .06 (b)
                      (.13)       (.04)       (.10)       (.21)

          4.79         .67         .05 (c)
                      (.14)       (.04)

        Constant      AVED        AVEX         RET

Total     6.49                                 .71
                                              (.21)

          6.52                                 .71
                                              (.21)

          4.81        .04 (c)      .45         .80
                     (.10)        (.21)       (.13)

ML        7.14                                 .43
                                              (.22)

          7.14                                 .39
                                              (.25)

          6.07        .09 (c)      .27 (c)     .47
                     (.20)        (.43)       (.25)

SS        6.52                                 .61
                                              (.04)

                                               .63
                                              (.14)

          4.79        .04 (c)      .46         .72
                     (.12)        (.23)       (.14)

        Constant    [R.sup.2]       F          df

Total     6.49         .16       20.5         208

          6.52         .16       10.2         206

          4.81         .18       11.5         206

ML        7.14         .07        1.95 (c)     50

          7.14         .07        1.9 (b)      48

          6.07         .08        1.2 (c)

SS        6.52         .12       10.9         155

                       .13        5.6         153

          4.79         .14        6.4         153

Notes: (1.) No mark: significant at 5 percent level.

(a) Significant at 10 percent level.

(b) Significant at 20 percent level.

(c) Not significant.

(2.) Figures in parentheses refer to standard errors.

Table 6
Measurements of Income Inequality within Segments

                                     Whole                Substantially
                      Type of        Sample     Mainly        Self-
Measurement           Sample          (in       Linked      contained
of Inequality                       Percent)   (ML) (in     (SS) (in
                                               Percent)     Percent)

1. Ratio of Labour Income from Personal Standpoint (without Dependents)

[LABINC.sub.I]/                       70.0       56.9         75.5
[OWOINC.sub.i]

2. Ratio of Labour Income from Family Standpoint (with Dependents)

[LABINC.sub.i]/   [OWODEP.sub.i]/    102.6       92.7         107.0
[OWOINC.sub.i]    [LABDEP.sub.i]

LABINC = Average income of worker (including owner).

OWOINC = Average income of Owner.

LABDEP = Average number of dependents of worker (including owner).

OWODEP = Average number of dependents of owner.

i = Each firm.

Table 7
Measurements of Income Inequality between Segments, in Percent for
Whole Sample

[LABINC.sub.SS]/
[LABINC.sub.ML]                                  81.5

[OWOINC.sub.SS]/                                 61.4
[OWOINC.sub.ML]

[OWOINC.sub.SS]/   x    [LABDEP.sub.ML]/
[OWOINC.sub.ML]         [LABDEP.sub.SS]          71.0

[OWOINC.sub.SS]/   x    [OWODEP.sub.ML]/         61.4
[OWOINC.sub.ML]         [OWODEP.sub.SS]
COPYRIGHT 1988 Reproduced with permission of the Publications Division, Pakistan Institute of Development Economies, Islamabad, Pakistan.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1988 Gale, Cengage Learning. All rights reserved.

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Title Annotation:AGRICULTURAL DEVELOPMENT AND POLICY
Author:Cohen, S.I.; Havinga, Ivo C.
Publication:Pakistan Development Review
Article Type:Report
Geographic Code:9PAKI
Date:Dec 22, 1988
Words:5196
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