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Trade liberalization, labor reforms and formal–informal employment dynamics

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  • Bosch, Mariano
  • Goñi-Pacchioni, Edwin
  • Maloney, William

Abstract

This paper studies gross worker flows to explain the rise in informality in Brazilian metropolitan labor markets from 1983 to 2002. In particular, we examine the impact of trade and constitutional reforms (that include increased firing costs, tighter restrictions on overtime work, and fewer restrictions on union activity) occurring during the period. We find aggregate sectoral movements to be driven largely by changes in the hiring rates which, in turn are driven largely by the constitutional reforms. Trade liberalization accounts for roughly 1–2.5% of the increase in informality, while the constitutional reforms account for 30–40%.

Suggested Citation

  • Bosch, Mariano & Goñi-Pacchioni, Edwin & Maloney, William, 2012. "Trade liberalization, labor reforms and formal–informal employment dynamics," Labour Economics, Elsevier, vol. 19(5), pages 653-667.
    • Handle: RePEc:eee:labeco:v:19:y:2012:i:5:p:653-667
    DOI: 10.1016/j.labeco.2012.03.001
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    More about this item

    Keywords

    Gross worker flows; Labor market dynamics; Informality; Developing countries;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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