Content area
Full Text
ABSTRACT
Using recently available night lights and electricity consumption data for the 212 municipios (counties) of Veracruz state in southern Mexico, the informal economy is analyzed at the Mexican county level for the first time with such data. Most counties between 2000 and 2006 are found to have growing informal economies though the richest county, Boca Del Rio, exhibits a decline in informality suggesting a few wealthier counties may behave differently. Counties have a larger formal economy if they are in northern areas, have higher literacy rates, and more indigenous people. The informal economy appears to have reversed its declining share of total economic activity towards more growth during the Fox era though the regional government of Veracruz remained in the hands of the PRI perhaps limiting federal reform efforts.
JEL Classifications: R3, Ol, F00
Keywords: Veracruz, Informal Economy, and Night Lights
(ProQuest: ... denotes formulae omitted.)
INTRODUCTION
The shadow or informal economy has been studied for decades using various methods ranging from adjusting national GDP (macro) to household surveys (micro) with the definition of the informal economy varying as well (Schneider & Enste, 2000). Work on the informal economy in Latin America in general is relatively rare until recently (Portes, 1996). In this study, we will use the informal economy definition found in the recent literature on Latin America (Loayza et al., 2009) but with relatively new night time luminosity data and electricity consumption data to measure total economic activity (Henderson et al., 2009) in Veracruz state in southern Mexico. Our approach is a macroeconomic study of informality as we will not consider households, but instead analyze 212 small municipios (counties) across a large Mexican state (see Figure 1). County level analysis allows us to measure economic activity even if the household does not have electricity which is sometimes the case in rural Mexico. Cross-county analysis also facilitates using night time luminosity data developed since 1994 which are unavailable at the household level. While extensive county level studies exist in some countries (e.g. Rupasingha et al., 2002), we believe this regional economic analysis of Veracruz state municipios' informal economy is unique with little analysis of this state's economy in general (Ricker et al., 1999; Brock, forthcoming) in the literature. This is surprising given...