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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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    Cited by:

    1. Costas Meghir & Renata Narita & Jean-Marc Robin, 2015. "Wages and Informality in Developing Countries," American Economic Review, American Economic Association, vol. 105(4), pages 1509-1546, April.
    2. Rafael Dix-Carneiro & Brian K. Kovak, 2015. "Trade Reform and Regional Dynamics: Evidence From 25 Years of Brazilian Matched Employer-Employee Data," Upjohn Working Papers and Journal Articles 15-225, W.E. Upjohn Institute for Employment Research.
    3. Abeer Elshennawy & Dirk Willenbockel, 2014. "Trade Liberalization and the Costs and Benefits of Informality an Intertemporal General Equilibrium Model for Egypt," Working Papers 888, Economic Research Forum, revised Dec 2014.
    4. Haanwinckel, Daniel & Soares, Rodrigo R., 2016. "Workforce Composition, Productivity, and Labor Regulations in a Compensating Differentials Theory of Informality," IZA Discussion Papers 9951, Institute for the Study of Labor (IZA).
    5. Kiyoyasu Tanaka & Souknilanh Keola, 2017. "Shedding Light on the Shadow Economy: A Nighttime Light Approach," Journal of Development Studies, Taylor & Francis Journals, vol. 53(1), pages 32-48, January.
    6. Sirin Saracoglu, 2015. "The linkages between formal and informal sectors: A segmented labor markets analysis," EcoMod2015 8603, EcoMod.
    7. Dix Carneiro,Rafael & Kovak,Brian K., 2015. "Trade reform and regional dynamics : evidence from 25 years of Brazilian matched employer-employee data," Policy Research Working Paper Series 7205, The World Bank.
    8. L. Alan Winters & Antonio Martuscelli, 2014. "Trade Liberalization and Poverty: What Have We Learned in a Decade?," Annual Review of Resource Economics, Annual Reviews, vol. 6(1), pages 493-512, October.
    9. Rafael Dix-Carneiro & Brian K. Kovak, 2017. "Margins of Labor Market Adjustment to Trade," NBER Working Papers 23595, National Bureau of Economic Research, Inc.
    10. Alexander Muravyev, 2014. "Employment protection legislation in transition and emerging markets," IZA World of Labor, Institute for the Study of Labor (IZA), pages 1-63, September.
    11. Rafael Dix-Carneiro & Brian K. Kovak, 2015. "Trade Reform and Regional Dynamics: Evidence From 25 Years of Brazilian Matched Employer-Employee Data," NBER Working Papers 20908, National Bureau of Economic Research, Inc.
    12. Gabriel Ulyssea, 2014. "Firms, Informality and Development: Theory and evidence from Brazil," Textos para discussão 632, Department of Economics PUC-Rio (Brazil).
    13. repec:iza:izawol:journl:y:2017:n:394 is not listed on IDEAS
    14. Pablo Acosta & Gabriel Montes-Rojas, 2014. "Informal Jobs and Trade Liberalisation in Argentina," Journal of Development Studies, Taylor & Francis Journals, vol. 50(8), pages 1104-1118, August.
    15. Heid, Benedikt, 2014. "Preferential Trade Agreements, Unemployment, and the Informal Sector," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100376, Verein für Socialpolitik / German Economic Association.
    16. Irène Selwaness & Chahir Zaki, 2013. "Assessing the Impact of Trade Reforms on Informality in Egypt," Working Papers 759, Economic Research Forum, revised Jun 2013.

    More about this item

    Keywords

    Gross worker flows; Labor market dynamics; Informality; Developing countries;

    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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