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What Aspects of Formality Do Workers Value? Evidence from a Choice Experiment in Bangladesh

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  • Minhaj Mahmud
  • Italo A Gutierrez
  • Krishna B Kumar
  • Shanthi Nataraj

Abstract

This study uses a choice experiment among 2,000 workers in Bangladesh to elicit willingness to pay (WTP) for job attributes: a contract, termination notice, working hours, paid leave, and a pension fund. Using a stated preference method allows calculation of WTP for benefits in this setting, despite the lack of data on worker transitions, and the fact that many workers are self-employed, which makes it difficult to use revealed preference methods. Workers highly value job stability: the average worker would be willing to forgo a 27 percent increase in income to obtain a one-year contract (relative to no contract), or to forgo a 12 percent increase to obtain thirty days of termination notice. There is substantial heterogeneity in WTP by type of employment and gender: women value shorter working hours more than men, while government workers place a higher value on contracts than do private-sector employees.

Suggested Citation

  • Minhaj Mahmud & Italo A Gutierrez & Krishna B Kumar & Shanthi Nataraj, 2021. "What Aspects of Formality Do Workers Value? Evidence from a Choice Experiment in Bangladesh," The World Bank Economic Review, World Bank, vol. 35(2), pages 303-327.
    • Handle: RePEc:oup:wbecrv:v:35:y:2021:i:2:p:303-327.
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    File URL: http://hdl.handle.net/10.1093/wber/lhz046
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    Cited by:

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    2. Bossavie, Laurent & Cho, Yoonyoung & Heath, Rachel, 2023. "The effects of international scrutiny on manufacturing workers: Evidence from the Rana Plaza collapse in Bangladesh," Journal of Development Economics, Elsevier, vol. 163(C).
    3. Italo A. Gutierrez & Krishna B. Kumar & Minhaj Mahmud & Farzana Munshi & Shanthi Nataraj, 2019. "Transitions between informal and formal employment: results from a worker survey in Bangladesh," IZA Journal of Migration and Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 9(1), pages 1-27, December.
    4. Sanou, Awa & Liverpool-Tasie, Lenis Saweda O. & Caputo, Vincenzina & Kerr, John, 2021. "Introducing an aflatoxin-safe labeling program in complex food supply chains: Evidence from a choice experiment in Nigeria," Food Policy, Elsevier, vol. 102(C).
    5. Ricardo Hausmann & Ljubica Nedelkoska & Sehar Noor, 2020. "You Get What You Pay For: Sources and Consequences of the Public Sector Premium in Albania and Sri Lanka," CID Working Papers 376, Center for International Development at Harvard University.
    6. Kumar, Krishna B. & Mahmud, Minhaj & Nataraj, Shanthi & Cho, Yoon Y., 2019. "Employer and Employee Preferences for Worker Benefits: Evidence from a Matched Survey on the Bangladesh Informal Sector," IZA Discussion Papers 12064, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    informality; working conditions; choice experiment;
    All these keywords.

    JEL classification:

    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J81 - Labor and Demographic Economics - - Labor Standards - - - Working Conditions

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