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Informality and Segmentation in the Mexican Labor Market

Author

Listed:
  • Alcaraz Carlo
  • Chiquiar Daniel
  • Salcedo Alejandrina

Abstract

In developing countries, some workers have formal jobs while others are occupied in informal positions. One view regarding this duality suggests that sectors are segmented, which means that a worker in the informal sector identical to another in the formal sector cannot get a formal position due to entry barriers. A second view states that workers self-select into informal jobs. Previous research suggests that these two situations may coexist in the same labor market. In this paper we identify the proportion of informal workers who are in each situation for the case of Mexico. Using a simple model of self-selection with entry barriers into the formal sector, we estimate that between 10 and 20 percent of informal workers would prefer to have a formal job. While this result provides evidence of the presence of some segmentation in the Mexican labor market, it suggests that an important proportion of workers in the informal sector self-select into it.

Suggested Citation

  • Alcaraz Carlo & Chiquiar Daniel & Salcedo Alejandrina, 2015. "Informality and Segmentation in the Mexican Labor Market," Working Papers 2015-25, Banco de México.
  • Handle: RePEc:bdm:wpaper:2015-25
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    References listed on IDEAS

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    Cited by:

    1. Rodriguez Castelan, Carlos & Vazquez, Emmanuel, 2022. "Labor Informality and Market Segmentation in Senegal," IZA Discussion Papers 15564, Institute of Labor Economics (IZA).
    2. Aguilar-Argaez Ana María & Alcaraz Carlo & Ramírez Claudia & Rodríguez-Pérez Cid Alonso, 2020. "The NAIRU and Informality in the Mexican Labor Market," Working Papers 2020-09, Banco de México.
    3. Esteban-Pretel, Julen & Kitao, Sagiri, 2021. "Labor Market Policies in a Dual Economy," Labour Economics, Elsevier, vol. 68(C).
    4. Cristina Fernández & Leonardo Villar & Nicolás Gómez, 2017. "Taxonomía de la informalidad en América Latina," Coyuntura Económica, Fedesarrollo, vol. 47(1 y 2), pages 137-167, December.
    5. Samaniego de la Parra Brenda & Fernández Bujanda León, 2020. "Increasing the Cost of Informal Workers: Evidence from Mexico," Working Papers 2020-19, Banco de México.
    6. Leyva, Gustavo & Urrutia, Carlos, 2020. "Informality, labor regulation, and the business cycle," Journal of International Economics, Elsevier, vol. 126(C).
    7. Cortez, Willy Walter & Islas C., Alejandro, 2018. "Can the informal sector affect the relationship between unemployment and output? An analysis of the Mexican case," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    8. Leyva Gustavo & Urrutia Carlos, 2021. "Informal Labor Markets in Times of Pandemic: Evidence for Latin America and Policy Options," Working Papers 2021-21, Banco de México.
    9. Jaime Lara Lara & Leobardo Pedro Plata Pérez, 2021. "Satisfacción con la vida y condiciones de empleo en México," Economía: teoría y práctica, Universidad Autónoma Metropolitana, México, vol. 55(2), pages 109-126, Julio-Dic.
    10. Cesar Gustavo Iriarte Rivas, 2018. "Three essays on the Mexican labour market," Economics PhD Theses 0418, Department of Economics, University of Sussex Business School.
    11. Felipe Lobel, 2022. "The Unequal Incidence of Payroll Taxes with Imperfect Competition: Theory and Evidence," Papers 2210.15776, arXiv.org.
    12. Bazdresch Santiago, 2018. "Finance and Employment Formalization: Evidence from Mexico's ENIGH, 2000-2016," Working Papers 2018-14, Banco de México.
    13. Finkelstein Shapiro, Alan, 2018. "Labor force participation, interest rate shocks, and unemployment dynamics in emerging economies," Journal of Development Economics, Elsevier, vol. 133(C), pages 346-374.

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    More about this item

    Keywords

    Informality; Segmentation; Mexico; Labor Market;
    All these keywords.

    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market

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