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Formal Labor Market Dynamics and Development

Author

Listed:
  • Brockmeyer, Anne

    (World Bank Group)

  • Gerard, Francois

    (UCL & IFS)

  • Ulyssea, Gabriel

    (UCL)

  • Wu, Linda

    (UBC)

  • Bergolo, Marcelo

    (IECON, Universidad de la República)

  • Ceni Gonzalez, Rodrigo

    (Universidad de la Republica)

  • Kirui, Benard

    (Privatisation Commission)

  • Lopez-Luzuriaga, Andrea

    (IADB and George Washington University)

  • Morales, Leonardo

    (Central Bank of Colombia)

  • Otero-Cortés, Andrea

    (Central Bank of Colombia)

  • Riedel, Nadine

    (University of Munster)

  • Tapia, Matías

    (Central Bank of Chile)

  • Tawichsri, Tanisa

    (Bank of Thailand)

  • Wiedemann, Verena

    (World Bank Group)

Abstract

This paper studies formal employment dynamics using linked employer–employee data from eight countries spanning a wide income range from Kenya to Chile. First, we show that formality rates increase with development, both between and within countries, because more workers enter the formal sector, not because they spend more time in formal jobs. Second, formal labor market fluidity increases with development, as workers hold more formal jobs, spend less time in each job, and less time between jobs. Third, greater fluidity is associated with higher life-cycle wage growth, which is largely accounted for by within- rather than between-firm wage gains.

Suggested Citation

  • Brockmeyer, Anne & Gerard, Francois & Ulyssea, Gabriel & Wu, Linda & Bergolo, Marcelo & Ceni Gonzalez, Rodrigo & Kirui, Benard & Lopez-Luzuriaga, Andrea & Morales, Leonardo & Otero-Cortés, Andrea & R, 2026. "Formal Labor Market Dynamics and Development," IZA Discussion Papers 18733, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp18733
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    Keywords

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    JEL classification:

    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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