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Trade Liberalisation and Informality: New stylized facts

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  • Norbert Fiess
  • Marco Fugazza

Abstract

The relationship between trade liberalisation and informal activity has not received the attention, whether theoretical or empirical, that it may deserve. The conventional view poses that trade liberalisation would cause a rise in informality. This paper uses three different data sets to assess the sign of the relationship. Empirical results provide a mixed picture. Macro founded data tend to produce results supporting the conventional view. Micro founded data do not. Empirical results also suggest that while informal output increases with deeper trade liberalisation, informal employment falls.

Suggested Citation

  • Norbert Fiess & Marco Fugazza, 2008. "Trade Liberalisation and Informality: New stylized facts," Working Papers 2008_34, Business School - Economics, University of Glasgow.
    • Handle: RePEc:gla:glaewp:2008_34
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    More about this item

    Keywords

    Informal Sector; Trade Liberalisation; Cross-sectional Analysis; Time Series Analysis; Panel Analysis;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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