Would Recessionary Shock Induce More Intermediation in the Informal Sector?

Would Recessionary Shock Induce More Intermediation in the Informal Sector?

This paper attempts to give an idea about the upshot of a recessionary phase on the intermediation activity which is required for the survival of the informal fragment of a society. Informal part of the economy covers a large chunk of the total economic activities in any developing economy. Therefore it is imperative to check the possible consequences of recession on this subdivision because intermediation also requires unskilled work force which need to be pulled out from the productive spectrum. In doing so I have used the hybrid of standard Heckscher-Ohlin and Specific Factor general equilibrium models of trade. In such a framework it has been shown that a recessionary shock may induce an expansion in intermediation activity under certain factor intensity assumption.