Trade, informal employment and labor adjustment costs
AbstractInformal employment is ubiquitous in developing countries, but few studies have estimated workers'switching costs between informal and formal employment. This paper builds on the empirical literature grounded in discrete choice models to estimate these costs. The results suggest that inter-industry labor mobility costs are large, but entry costs into informal employment are significantly lower than the costs of entry in formal employment. Simulations of labor-market adjustments caused by a trade-related fall in manufacturing goods prices indicate that the share of informally employed workers rises after liberalization, but this is due to entry into the labor market by previously idle labor.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 6614.
Date of creation: 01 Sep 2013
Date of revision:
Labor Markets; Labor Policies; Economic Theory&Research; Work&Working Conditions; Labor Standards;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-10-02 (All new papers)
- NEP-DCM-2013-10-02 (Discrete Choice Models)
- NEP-DEV-2013-10-02 (Development)
- NEP-INT-2013-10-02 (International Trade)
- NEP-IUE-2013-10-02 (Informal & Underground Economics)
- NEP-LAB-2013-10-02 (Labour Economics)
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