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Job Polarization and the Informal Labor Market

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  • Gomez, M

Abstract

This paper analyses the incidence of job polarization in developing and emerging countries, where a substantial fraction of the urban labor force works in the informal sector. I build a general equilibrium model with informality and endogenous occupational choice. Workers in the informal sector do not pay taxes, are less productive, and have the same ability to perform manual tasks. The analytical solution of the model shows that job polarization, driven by a Routine-Biased Technological Change (RBTC), could lead to a decrease in the share of employment in the informal sector and a reduction in the wage inequality at the bottom of the skill distribution.

Suggested Citation

  • Gomez, M, 2021. "Job Polarization and the Informal Labor Market," Documentos de trabajo - Alianza EFI 19418, Alianza EFI.
    • Handle: RePEc:col:000561:019418
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    References listed on IDEAS

    as
    1. Graetz, Georg & Feng, Andy, 2014. "Rise of the Machines: The Effects of Labor-Saving Innovations on Jobs and Wages," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100401, Verein für Socialpolitik / German Economic Association.
    2. Guy Michaels & Ashwini Natraj & John Van Reenen, 2010. "Has ICT Polarized Skill Demand? Evidence from Eleven Countries over 25 Years," CEP Discussion Papers dp0987, Centre for Economic Performance, LSE.
    3. Reijnders, Laurie S.M. & de Vries, Gaaitzen J., 2018. "Technology, offshoring and the rise of non-routine jobs," Journal of Development Economics, Elsevier, vol. 135(C), pages 412-432.
    4. Derek Blades & Francisco H. G. Ferreira & Maria Ana Lugo, 2011. "The Informal Economy In Developing Countries: An Introduction," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 57, pages 1-7, May.
    5. David H. Autor & Frank Levy & Richard J. Murnane, 2003. "The skill content of recent technological change: an empirical exploration," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
    6. Maarten Goos & Alan Manning & Anna Salomons, 2014. "Explaining Job Polarization: Routine-Biased Technological Change and Offshoring," American Economic Review, American Economic Association, vol. 104(8), pages 2509-2526, August.
    7. Guy Michaels & Ashwini Natraj & John Van Reenen, 2014. "Has ICT Polarized Skill Demand? Evidence from Eleven Countries over Twenty-Five Years," The Review of Economics and Statistics, MIT Press, vol. 96(1), pages 60-77, March.
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    More about this item

    Keywords

    Informality; Job polarization; Technological change; Wage distribution;
    All these keywords.

    JEL classification:

    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market

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