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What Aspects of Formality Do Workers Value? Evidence from a Choice Experiment in Bangladesh

Author

Listed:
  • Mahmud, Minhaj

    (Bangladesh Institute of Development Studies (BIDS))

  • Gutierrez, Italo A.

    (Amazon)

  • Kumar, Krishna B.

    (RAND)

  • Nataraj, Shanthi

    (RAND)

Abstract

Using a choice experiment among 2,000 workers in Bangladesh, we to elicit willingness to pay (WTP) for specific job benefits typically associated with formal employment. We find that workers value job stability the most; the average worker would be willing to forego a 27 percent increase in monthly income in order to obtain a 1-year written contract (relative to no contract), or to forego a 12 percent increase to obtain thirty days of termination notice. On average, government workers place a higher value on contracts than do private sector employees, while casual workers particularly value higher pay. Our use of choice experiments to overcome the challenges associated with estimating WTP for specific job benefits from hedonic wage regressions or from observed job transitions is of interest in its own right, especially in a developing country context where data on worker transitions are unavailable and many workers are informally employed.

Suggested Citation

  • Mahmud, Minhaj & Gutierrez, Italo A. & Kumar, Krishna B. & Nataraj, Shanthi, 2019. "What Aspects of Formality Do Workers Value? Evidence from a Choice Experiment in Bangladesh," IZA Discussion Papers 12121, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp12121
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    References listed on IDEAS

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    Cited by:

    1. Italo A. Gutierrez & Krishna B. Kumar & Minhaj Mahmud & Farzana Munshi & Shanthi Nataraj, 2019. "Transitions between informal and formal employment: results from a worker survey in Bangladesh," IZA Journal of Migration and Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 9(1), pages 1-27, December.
    2. Ricardo Hausmann & Ljubica Nedelkoska & Sehar Noor, 2020. "You Get What You Pay For: Sources and Consequences of the Public Sector Premium in Albania and Sri Lanka," CID Working Papers 376, Center for International Development at Harvard University.
    3. Kumar, Krishna B. & Mahmud, Minhaj & Nataraj, Shanthi & Cho, Yoon Y., 2019. "Employer and Employee Preferences for Worker Benefits: Evidence from a Matched Survey on the Bangladesh Informal Sector," IZA Discussion Papers 12064, Institute of Labor Economics (IZA).
    4. Bossavie, Laurent & Cho, Yoon Y. & Heath, Rachel, 2020. "The Effects of International Scrutiny on Manufacturing Workers: Evidence from the Rana Plaza Collapse in Bangladesh," IZA Discussion Papers 13782, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    discrete choice experiments; worker benefits; informality;
    All these keywords.

    JEL classification:

    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J81 - Labor and Demographic Economics - - Labor Standards - - - Working Conditions

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