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Trade Liberalisation and Informality: New stylized facts

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Author Info
Norbert Fiess
Marco Fugazza

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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.

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Paper provided by Department of Economics, University of Glasgow in its series Working Papers with number 2008_34.

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Date of creation: Dec 2008
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Handle: RePEc:gla:glaewp:2008_34

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Related research
Keywords: Informal Sector; Trade Liberalisation; Cross-sectional Analysis; Time Series Analysis; Panel Analysis;

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Find related papers by JEL classification:
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
O17 - Economic Development, 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

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    Other versions:
  2. Schneider, Friedrich, 2007. "Shadow Economies and Corruption All Over the World: New Estimates for 145 Countries," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 1(9), pages 1-66. [Downloadable!]
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  5. Goldberg, Pinelopi Koujianou & Pavcnik, Nina, 2003. "The Response of the Informal Sector to Trade Liberalization," CEPR Discussion Papers 3874, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  6. Loayza, Norman V. & Rigolini, Jamele, 2006. "Informality trends and cycles," Policy Research Working Paper Series 4078, The World Bank. [Downloadable!]
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  17. Friedrich Schneider & Dominik H. Enste, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March. [Downloadable!] (restricted)
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