This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Exchange rate appreciations, labor market rigidities, and informality

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Fugazza, Marco
Fiess, Norbert M.
Maloney, William

Additional information is available for the following registered author(s):

Abstract

This paper works at the interface of the literature exploring the raison d'etre of the informal labor market and that explaining the real exchange rate appreciations occurring in many Latin American countries during periods of reform. The authors first build a small country-Australian style model where the informal sector is seen as an unregulated non-tradables sector, augmented by heterogeneity in entrepreneurial ability and capital adjustment costs. They then examine the behavior of the model with and without a formal sector rigidity. It shows that the co-movements of relative formal/informal incomes, formal/informal sector size, and the real exchange rate can offer insight into the level of distortion in the labor market and the source of exchange rate fluctuations. The paper then explores time series data from Brazil, Colombia and Mexico using multivariate co-integration techniques to establish what"regime"each country is in at various periods of time. Mexico appears to be relatively undistorted and the 1987-92 appreciation appears to be largely a function of a boom in the non-tradables sector rather than wage inertia. In spite of a secular expansion of the informal sector there is little evidence of dualism or of a rigidity driven appreciation of the Real, from 1993-1996. Post 1995 Colombia corresponds to a classic segmented labor market and an appreciation partly driven by labor market rigidities. Graphical analysis suggests that neither the Argentine appreciation (1988-1992) or the celebrated Chilean appreciation (1975-1982) were driven by inertial forces

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2004/01/30/000265513_20040130102844/Rendered/PDF/wps2771.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2771.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: 07 Feb 2002
Date of revision:
Handle: RePEc:wbk:wbrwps:2771

Contact details of provider:
Postal: 1818 H Street, N.W., Washington, DC 20433
Email:
Web page: http://www.worldbank.org/
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Roula I. Yazigi).

Related research
Keywords: Labor Policies; Environmental Economics&Policies; Banks&Banking Reform; Economic Theory&Research; Fiscal&Monetary Policy; Environmental Economics&Policies; Economic Theory&Research; Economic Stabilization; Macroeconomic Management; Banks&Banking Reform;

Other versions of this item:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Irving B. Kravis & Robert E. Lipsey, 1982. "Towards an Explanation of National Price Levels," NBER Working Papers 1034, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Hamilton, Jonathan & Thisse, Jacques-François & Zenou, Yves, 1999. "Wage Competition with Heterogeneous Workers and Firms," CEPR Discussion Papers 2141, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Dornbusch, Rudiger, 1982. "Stabilization policies in developing countries: What have we learned?," World Development, Elsevier, vol. 10(9), pages 701-708, September. [Downloadable!] (restricted)
  4. Sergio Rebelo & Carlos A. Vegh, 1995. "Real Effects of Exchange-Rate-Based Stabilization: An Analysis of Competing Theories," NBER Chapters, in: NBER Macroeconomics Annual 1995, Volume 10, pages 125-188 National Bureau of Economic Research, Inc. [Downloadable!]
    Other versions:
  5. Guillermo Calvo & Carlos A. Végh Gramont, 1991. "Exchange-Rate-Based Stabilization Under Imperfect Credibility - G. A. Calvo and C. A. Vegh," IMF Working Papers 91/77, International Monetary Fund.
  6. Enrique G. Mendoza & Martin Uribe, 1996. "The syndrome of exchange-rate-based stabilizations and the uncertain duration of currency pegs," International Finance Discussion Papers 548, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  7. José De Gregorio & Pablo E. Guidotti & Carlos A. Végh, 1998. "Inflation Stabilization and the Consumption of Durable Goods," Documentos de Trabajo 26, Centro de Economía Aplicada, Universidad de Chile. [Downloadable!]
    Other versions:
  8. Calvo, Guillermo A. & Vegh, Carlos A., 1994. "Stabilization dynamics and backward-looking contracts," Journal of Development Economics, Elsevier, vol. 43(1), pages 59-84, February. [Downloadable!] (restricted)
    Other versions:
  9. Rudiger Dornbusch & Alejandro Werner, 1994. "Mexico: Stabilization, Reform, and No Growth," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1994-1), pages 253-316. [Downloadable!]
  10. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-27, August. [Downloadable!] (restricted)
  11. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254. [Downloadable!] (restricted)
  12. Agenor, Pierre-Richard & Aizenman, Joshua, 1999. "Macroeconomic adjustment with segmented labor markets," Journal of Development Economics, Elsevier, vol. 58(2), pages 277-296, April. [Downloadable!] (restricted)
    Other versions:
  13. Johansen, Søren & Juselius, Katarina, 1992. "Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 211-244. [Downloadable!] (restricted)
  14. Edwards, Sebastian, 1996. "Exchange-Rate Anchors, Credibility, and Inertia: A Tale of Two Crises, Chile and Mexico," American Economic Review, American Economic Association, vol. 86(2), pages 176-80, May. [Downloadable!] (restricted)
  15. Roldos, Jorge E, 1997. "On gradual disinflation, the real exchange rate, and the current account," Journal of International Money and Finance, Elsevier, vol. 16(1), pages 37-54, February. [Downloadable!] (restricted)
  16. Cheung, Yin-Wong & Lai, Kon S, 1993. "Finite-Sample Sizes of Johansen's Likelihood Ration Tests for Conintegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(3), pages 313-28, August.
  17. Aizenman, Joshua & Frenkel, Jacob A., 1988. "Sectorial wages and the real exchange rate," Journal of International Economics, Elsevier, vol. 24(1-2), pages 69-91, February. [Downloadable!] (restricted)
    Other versions:
  18. Sebastian Edwards & Alejandra Cox Edwards, 2000. "Economic Reforms and Labor Markets: Policy Issues and Lessons from Chile," NBER Working Papers 7646, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  19. Maloney, William F, 1999. "Does Informality Imply Segmentation in Urban Labor Markets? Evidence from Sectoral Transitions in Mexico," World Bank Economic Review, Oxford University Press, vol. 13(2), pages 275-302, May.
  20. Rodriguez, Carlos Alfredo, 1982. "The Argentine stabilization plan of December 20th," World Development, Elsevier, vol. 10(9), pages 801-811, September. [Downloadable!] (restricted)
  21. Johansen, Soren & Juselius, Katarina, 1994. "Identification of the long-run and the short-run structure an application to the ISLM model," Journal of Econometrics, Elsevier, vol. 63(1), pages 7-36, July. [Downloadable!] (restricted)
    Other versions:
  22. Conley, John P. & Maloney, William F., 1995. "Optimal sequencing of credible reforms with uncertain outcomes," Journal of Development Economics, Elsevier, vol. 48(1), pages 151-166, October. [Downloadable!] (restricted)
  23. Uribe, Martin, 1997. "Exchange-rate-based inflation stabilization: The initial real effects of credible plans," Journal of Monetary Economics, Elsevier, vol. 39(2), pages 197-221, July. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. William F. Maloney & Jairo Nunez Mendez, 2003. "Measuring the Impact of Minimum Wages: Evidence from Latin America," NBER Working Papers 9800, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Fiess, Norbert M. & Fugazza, Marco & Maloney, William F., 2008. "Informality and Macroeconomic Fluctuations," IZA Discussion Papers 3519, Institute for the Study of Labor (IZA). [Downloadable!]
  3. Fiess, Norbert M. & Fugazza, Marco & Maloney, William F., 2007. "Informal Labor Markets and Macroeconomic Fluctuations," Proceedings of the German Development Economics Conference, Göttingen 2007 6, Verein für Socialpolitik, Research Committee Development Economics. [Downloadable!]
    Other versions:
  4. Norbert Fiess & Marco Fugazza, 2008. "Trade Liberalisation and Informality: New stylized facts," Working Papers 2008_34, Department of Economics, University of Glasgow. [Downloadable!]
  5. Arias, Omar & Blom, Andreas & Bosch, Mariano & Cunningham, Wendy & Fiszbein, Ariel & Lopez Acevedo, Gladys & Maloney, William & Saavedra, Jaime & Sanchez-Paramo, Carolina & Santamaria, Mauricio & Siga, 2005. "Pending issues in protection, productivity growth, and poverty reduction," Policy Research Working Paper Series 3799, The World Bank. [Downloadable!]
  6. Mark McGillivray & Farhad Noorbakhsh, . "Aid, Conflict and Human Development," Working Papers 2007_03, Department of Economics, University of Glasgow. [Downloadable!]
Statistics
Access and download statistics

Did you know? IDEAS also covers the most complete directory of Economics departments and institutes, EDIRC.

This page was last updated on 2009-11-25.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.