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Determinants of Transitions across Formal/Informal Sectors in Egypt

Listed author(s):
  • Aysit Tansel

    ()

    (Department of Economics, METU; Institute for the Study of Labor (IZA) Bonn, Germany; Economic Research Forum (ERF) Cairo, Egypt)

  • Zeynel Abidin Ozdemir

    ()

    (Department of Economics, Gazi University; Economic Research Forum (ERF) Cairo, Egypt)

Informality is a salient feature of labor market in Egypt as it is the case with many developing countries. This is the first study of the determinants of worker transitions between various labor market states using panel data from Egypt. We first provide a diagnosis of dynamic worker flows across different labor market states. We develop transition probabilities by gender across different labor market states utilizing Markov transition processes. Next we identify the effects of individual, household, job characteristics and location on different mobility patterns by estimating a multinomial logit regression. The results point to the highly static nature of the Egyptian labor market. Government employment and the out of labor force are the most persistent labor market states. Further, only a few of the explanatory variables except high levels of education are found to have predictive power in explaining the transitions from formal wage, informal wage, self-employment, unemployment government employment and out of labor market states.

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File URL: http://www.erc.metu.edu.tr/menu/series15/1501.pdf
File Function: First version, 2015
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Paper provided by ERC - Economic Research Center, Middle East Technical University in its series ERC Working Papers with number 1501.

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Length: 45 pages
Date of creation: Jan 2015
Date of revision: Jan 2015
Handle: RePEc:met:wpaper:1501
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