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Informality and Openness to Trade: Insights from Cross-sectional and Panel Analyses

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  • Norbert Fiess
  • Marco Fugazza

Abstract

The relationship between trade liberalisation and informal activity has received little theoretical and empirical attention. The conventional view poses that trade liberalisation would cause a rise in the share of informal production and a rise in informal employment. This article uses three different datasets to assess econometrically the sign of these relationships. Empirical results suggest that while informal output increases with deeper openness to trade, informal employment falls. JEL Classification : F13, F16, O17, C23

Suggested Citation

  • Norbert Fiess & Marco Fugazza, 2012. "Informality and Openness to Trade: Insights from Cross-sectional and Panel Analyses," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 6(2), pages 235-275, May.
    • Handle: RePEc:sae:mareco:v:6:y:2012:i:2:p:235-275
    DOI: 10.1177/097380101200600207
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    Cited by:

    1. Becker, Dennis, 2014. "Heterogeneous Firms and Informality: The Effects of Trade Liberalization on Labor Markets," Working Papers 180124, Cornell University, Department of Applied Economics and Management.
    2. Devashish Mitra, 2019. "Responses to Trade Opening: Evidence and Lessons from Asia," Working Papers id:12977, eSocialSciences.
    3. Dennis Becker, 2018. "Heterogeneous firms and informality: the effects of trade liberalization on labour markets," Oxford Economic Papers, Oxford University Press, vol. 70(1), pages 47-72.

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    More about this item

    Keywords

    Informal Sector; Trade Liberalisation; Panel Analysis;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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