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Can the informal sector affect the relationship between unemployment and output? An analysis of the Mexican case

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  • Islas C., Alejandro
  • Cortez, Willy Walter

Abstract

A key aspect of developing countries is the existence of a large informal sector. In the present paper, we analyse the effect of this feature on the relationship between unemployment changes and output growth for Mexico, a country characterized by the existence of a large informal sector. Following recent studies on Okun’s coefficient, we first test whether the relationship between the cyclical components of unemployment and output is asymmetric. We then explore the possibility that this non-linear relationship may be affected by changes in the informal sector. Our results indicate that there is evidence of an asymmetric relationship between the cyclical components.

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  • Islas C., Alejandro & Cortez, Willy Walter, 2018. "Can the informal sector affect the relationship between unemployment and output? An analysis of the Mexican case," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    • Handle: RePEc:ecr:col070:44562
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    1. Loría, Eduardo & Rojas, Susana & Martínez, Eduardo, 2021. "Okun’s law in Mexico: an analysis of heterogeneity among States, 2004–2018," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
    2. Mina Baliamoune, 2022. "Trade and Youth Labor Market Outcomes: Empirical Evidence and Policy Implications," Research papers & Policy papers 1945, Policy Center for the New South.
    3. Maria Sylvina PORRAS‐ARENA & Ángel L. MARTÍN‐ROMÁN, 2023. "The correlation between unemployment and economic growth in Latin America – Okun's law estimates by country," International Labour Review, International Labour Organization, vol. 162(2), pages 171-198, June.

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