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Trade and employment in the formal and informal sectors : a natural experiment from Cambodia

Author

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  • Tanaka, Kiyoyasu
  • Greaney, Theresa M

Abstract

To assess how trade affects employment in the formal and informal sectors, we exploit a natural experiment from Cambodia; the EU’s reform in rules of origin for duty-free market access provided a positive export shock to the garment industry and a negative import shock to the textile industry. We use a unique dataset on both formally registered and unregistered establishments in Cambodia. We find that the trade shocks caused large positive employment effects on formal garment establishments and large negative employment effects on formal textile establishments, with little employment effects on informal establishments in these industries. The positive employment effects predominantly involve female workers in locally owned incumbent firms.

Suggested Citation

  • Tanaka, Kiyoyasu & Greaney, Theresa M, 2020. "Trade and employment in the formal and informal sectors : a natural experiment from Cambodia," IDE Discussion Papers 772, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper772
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    Cited by:

    1. Kiyoyasu Tanaka, 2021. "The European Union's reform in rules of origin and international trade: Evidence from Cambodia," The World Economy, Wiley Blackwell, vol. 44(10), pages 3025-3050, October.

    More about this item

    Keywords

    Trade; employment; informal sector; GSP; rules of origin; Cambodia; International trade;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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