Government-enterprise Collusion And Informal Employment

The informal employment,defined as workers who have no social protection,receive few incomes and are unprotected by labor laws is ubiquitous worldwide,particularly in developing countries.In China,more than half of urban workers are undertaking informal jobs,which means that numerous workers are unable to receive social protection.This poses severe challenges for state governance.Theoretically,the factors accounting for informal employment have long been a controversial issue.Existing literature has proposed three primary theoretical perspectives to explain the variation in the relative size of informal employment: modernization theory,neoliberal theory,and structuralist theory.However,they either fail to focus on the interactions between governments and market actors or tend to ignore the impact of collusion between them on the informal economy.Based on the theoretical framework of government-enterprise collusion,this study proposes that the informal reciprocal interaction between government and enterprises is an important explanatory factor for informal employment.Meantime,the study makes efforts to test the core propositions of the current three theoretical perspectives.The regression analysis of the panel data of30 provinces in China from 2002 to 2016 shows that the dummy variable of collusion has a significant positive impact on the sizes of informal selfemployment and informal wage employment.Based on inference,the mechanisms could be that: more collusion leads to local governments acquiescing private enterprises to disobey labor laws by informally employing workers,and thus brings about more informal wage employment;on the other hand,collusion accompanied by official corruption,potentially brings about more predatory behaviors of governments and pushes smallscale enterprises to enter informal economic fields to escape from high transaction costs.By testing the existing theoretical propositions,it is found that the anticipations of modernization theory and neoliberal theory are not supported;while the explanation of structuralist theory applies to informal self-employment,it does not hold in explaining informal wage employment.My findings have two theoretical implications: first,China as an important case is conducive to revising and developing existing theories;second,when trying to explaining the informal economy,we need to pay more attention to its heterogeneity.