This presentation by the CARICOM Competition Commission was made during the discussion on Informal Economy during the 2018 edition of the OECD-IDB Latin American and Caribbean Competition Forum held in Buenos Aires, Argentina on 18-19 September 2018. Find all related materials at the forum website http://oe.cd/laccf.

1. CONTRIBUTION FROM CARICOM
PRESENTED BY:
ROMMELL HIPPOLYTE
CARICOM COMPETITION COMMISSION
LATIN AMERICAN AND CARIBBEAN
COMPETITION FORUM
The informal economy in Latin America and the
Caribbean: Implications for competition policy

2. Informal Economy in CARICOM
27.0
28.0
29.0
30.0
31.0
32.0
33.0
34.0
35.0
36.0
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
PercentageofGDP
CARICOM Informality (Regional Averages)
Data sources: Mapp and Moore (2014) and A. Peters (2017)

3. Characteristics of Informal Sector in the Caribbean
 Many small economic agents – one person, no employees
 Fragmented – acting individually
 Markets mainly homogeneous goods, e.g. agriculture, or
comparable services e.g. hair dressers,
 Easy entry and exit
 Not strictly prohibited under national laws unless risks to
consumers exist (e.g. health and safety)

4. Informality and Competition law
Given the characteristics, two questions considered:
 Since competition law and policy is generally concerned with
market power:
 Should competition agencies in CARICOM dedicate scarce
resources towards enforcement activities for the informal sector?
 Possibly no single or collective dominance among informal
operators!
 What is the impact of informality on market conditions
(specifically prices) - Testable????

5. Informality
• Macroeconomic
• Economy
Competition law
• Microeconomic
• Markets
CHALLENGE

6. Relationship between Inflation and Informality???
3.30
3.40
3.50
3.60
3.70
3.80
-0.50
0.00
0.50
1.00
1.50
2.00
2.50
1991 1994 1997 2000 2003 2006 2009
Naturallogs
Barbados: Informality vs Inflation
Inflation Informality
3.25
3.30
3.35
3.40
3.45
3.50
3.55
3.60
3.65
3.70
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
1991 1994 1997 2000 2003 2006 2009
Naturallogs
Jamaica: Inflation vs Informality
Inflation Informality

7. Relationship between Inflation and Informality
3.10
3.20
3.30
3.40
3.50
3.60
3.70
3.80
3.90
4.00
0.50
1.00
1.50
2.00
2.50
3.00
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
NaturalLogs
Trinidad and Tobago: Inflation vs Informality
Inflation Informality
3.30
3.35
3.40
3.45
3.50
3.55
3.60
0.00
0.50
1.00
1.50
2.00
2.50
3.00
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
Naturallogs
Guyana: Inflation vs Informality
Inflation Informality

8. How do we interpret the results?
 Positive relationship
 Facilitates prices?
 Possible collusive behaviour in markets? D’Aspremont et al (1983)
 Need for awareness by competition authorities!!
 Negative relationship?
 Constrains formal businesses (dominant groups) from raising prices?
 Collectively possible important competitors?
 Need for awareness by competition authorities!!
 No (insignificant) relationship?
 Not important competitors?
 No need for competition authorities to worry?

9. Relationship between Inflation and Informality
 Preliminary analysis to test the assumptions made about the
informal economy and its possible impact on domestic prices.
 Panel Autoregressive Distributed Lagged (ARDL) models
 Results show a long-run, non-linear relationship between
informality and inflation
 Implies that initially, when it is generally low, informality
reduces inflation, but as it continues to rise it raises inflation.

10. 3.4
3.6
3.8
4
4.2
4.4
4.6
4.8
5
2.8 3 3.2 3.4 3.6 3.8
Inflation
Informality
Inflation versus Informality (with quadratic fit)

11. Conclusions
 We are aware of the difficulties of bridging the gap between
informality and competition law – hence the framework is not
perfect.
 It can be applied to all levels of data to serve as an indicator of if
informality causes problems on markets.
THANK YOU!