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Is Informality Good for Business?: The Impacts of Inflows of Internally Displaced Persons on Formal Firms

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  • Sandra V. Rozo
  • Hernan Winkler

Abstract

We examine the effects of large inflows of internally displaced persons (IDP), who are primarily absorbed by the informal sector, on the behavior of formal manufacturing firms in Colombia. To identify causal effects, we employ annual firm-level panel data between 1995 and 2010 and exploit the fact that, when conflict intensifies, forcefully displaced individuals tend to migrate to municipalities where people from their origin locations settled earlier. We find that large inflows of IDP induce sizable negative effects on the intensive and extensive margins of production of formal firms. These effects are stronger for firms operating in sectors that face a stronger competition from the informal economy.

Suggested Citation

  • Sandra V. Rozo & Hernan Winkler, 2021. "Is Informality Good for Business?: The Impacts of Inflows of Internally Displaced Persons on Formal Firms," Journal of Human Resources, University of Wisconsin Press, vol. 56(4), pages 1141-1186.
    • Handle: RePEc:uwp:jhriss:v:56:y:2021:i:4:p:1141-1186
    Note: DOI: 10.3368/jhr.56.4.1018-9794R2
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    File URL: http://jhr.uwpress.org/cgi/reprint/56/4/1141
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    Cited by:

    1. Claudio Deiana & Ludovica Giua & Roberto Nisticò, "undated". "Legalization and Long-Term Outcomes of Immigrant Workers," Development Working Papers 480, Centro Studi Luca d'Agliano, University of Milano.

    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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