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Informal Employment Relationships and Labor Market Segmentation in Transition Economies: Evidence from Ukraine

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  • Lehmann, Hartmut

    ()
    (University of Bologna)

  • Pignatti, Norberto

    ()
    (ISET, Tbilisi State University)

Abstract

Research on informal employment in transition countries has been very limited because of a lack of appropriate data. A new rich panel data set from Ukraine, the Ukrainian Longitudinal Monitoring Survey (ULMS), enables us to provide some empirical evidence on informal employment in Ukraine and the validity of the three schools of thought in the literature on the role of informality in the development process. Apart from providing additional evidence with richer data than usually available in developing countries, the paper investigates to what extent the informal sector plays a role in labor market adjustment in a transition economy. The evidence points to some labor market segmentation since the majority of informal salaried employees are involuntarily employed and workers seem to queue for formal salaried jobs. We also show that the dependent informal sector is segmented into a voluntary “upper tier” and an involuntary lower part where the majority of informal jobs are located. Our contention that informal self-employment is voluntary is confirmed by the substantial earnings premia associated with movements into this state.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3269.

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Length: 64 pages
Date of creation: Dec 2007
Date of revision:
Handle: RePEc:iza:izadps:dp3269

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Keywords: labor market segmentation; transition economies; Ukraine;

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  1. Maloney, William F, 1999. "Does Informality Imply Segmentation in Urban Labor Markets? Evidence from Sectoral Transitions in Mexico," World Bank Economic Review, World Bank Group, World Bank Group, vol. 13(2), pages 275-302, May.
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  3. Hartmut Lehmann & Jonathan Wadsworth, 1999. "Tenures that Shook the World: Worker Turnover in Russia, Poland and Britain," CERT Discussion Papers, Centre for Economic Reform and Transformation, Heriot Watt University 9909, Centre for Economic Reform and Transformation, Heriot Watt University.
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  12. Chandra, Vandana & Khan, M Ali, 1993. "Foreign Investment in the Presence of an Informal Sector," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 60(237), pages 79-103, February.
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