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Are Informal Self-Employment and Informal Employment as Employee Behaviorally Distinct Labor Force States?

Author

Listed:
  • Flabbi, Luca

    (University of North Carolina, Chapel Hill)

  • Tejada, Mauricio

    (Diego Portales University)

Abstract

The paper performs both a parametric and non-parametric analysis to address a fundamental question in the growing literature using search models to study labor market informality: should informal self-employment and informal employment as employee be considered two different labor market states? Both the non-parametric and the parametric tests strongly reject equality between the two states, cautioning against aggregating them in a common "informality state." The parametric model indicates the source of the difference in the high dispersion of informal self-employment income and in the low duration of informal employee jobs.

Suggested Citation

  • Flabbi, Luca & Tejada, Mauricio, 2023. "Are Informal Self-Employment and Informal Employment as Employee Behaviorally Distinct Labor Force States?," IZA Discussion Papers 16225, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp16225
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    References listed on IDEAS

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    1. Charlot, Olivier & Malherbet, Franck & Ulus, Mustafa, 2013. "Efficiency in a search and matching economy with a competitive informal sector," Economics Letters, Elsevier, vol. 118(1), pages 192-194.
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    Cited by:

    1. Flabbi, Luca & Tejada, Mauricio M., 2023. "Are informal self-employment and informal employment as employee behaviorally distinct labor force states?," Economics Letters, Elsevier, vol. 231(C).

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    More about this item

    Keywords

    labor market frictions; search and matching; informality; self-employment;
    All these keywords.

    JEL classification:

    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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