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Mobility in the Urban Labor Market: A Panel Data Analysis for Mexico

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  • Gong, Xiaodong

    ()
    (NATSEM, University of Canberra)

  • van Soest, Arthur

    ()
    (Tilburg University)

  • Villagomez, Elizabeth

    ()
    (Fundacion Tomillo, Centro de Estudios Economicos)

Abstract

We analyze mobility in urban Mexico between three labor market states: working in the formal sector, working in the informal sector, and not working. We use a dynamic multinomial logit panel data model with random effects, explaining the labor market state of each individual during each time period. The data is drawn from Mexico ’s Urban Employment Survey, a quarterly household survey for urban Mexico. Two separate five-wave panels are used: the first covering a period of rapid economic growth (1992-1993), the second a period of recession after the Peso crisis (1994-1995). Our main results are in line with the theory that formal sector jobs are superior to informal sector jobs and that working in the informal sector is a temporary state for those who cannot find a formal sector job and cannot afford not to work. Entry and exit rates for the formal sector are lower than for the informal sector. The probability of formal sector employment strongly increases with education level. For men, it is easier to enter the formal sector from the non-working state than from the informal sector. The probability of working in the informal sector decreases with the level of income of other family members, while the probability of not working increases with it.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 213.

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Length: 39 pages
Date of creation: Nov 2000
Date of revision:
Publication status: published in: Economic Development and Cultural Change, 2004, 53 (1), 1-36
Handle: RePEc:iza:izadps:dp213

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Keywords: panel data; Informal sector work; mobility; Mexico;

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  1. Menno Pradhan & Arthur Van Soest, 1997. "Household Labor Supply In Urban Areas Of Bolivia," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 300-310, May.
  2. Fields, Gary S., 1975. "Rural-urban migration, urban unemployment and underemployment, and job-search activity in LDCs," Journal of Development Economics, Elsevier, Elsevier, vol. 2(2), pages 165-187, June.
  3. Pradhan, Menno & van Soest, Arthur, 1995. "Formal and informal sector employment in urban areas of Bolivia," Labour Economics, Elsevier, Elsevier, vol. 2(3), pages 275-297, September.
  4. Heckman, James J & Sedlacek, Guilherme, 1985. "Heterogeneity, Aggregation, and Market Wage Functions: An Empirical Model of Self-selection in the Labor Market," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 93(6), pages 1077-1125, December.
  5. Magnac, Th, 1991. "Segmented or Competitive Labor Markets," Econometrica, Econometric Society, Econometric Society, vol. 59(1), pages 165-87, January.
  6. Gourieroux, Christian & Monfort, Alain, 1993. "Simulation-based inference : A survey with special reference to panel data models," Journal of Econometrics, Elsevier, Elsevier, vol. 59(1-2), pages 5-33, September.
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