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Informal Employment in a Growing and Globalizing Low-income Country

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  • Brian McCaig
  • Nina Pavcnik

Abstract

We document several facts about workforce transitions from the informal to the formal sector in Vietnam, a fast growing, industrializing, and low-income country. First, younger workers, particularly migrants, are more likely to work in the formal sector and stay there permanently. Second, the decline in the aggregate share of informal employment occurs through changes between and within birth cohorts. Third, younger, educated, male, and urban workers are more likely to switch to the formal sector than other workers initially in the informal sector. Poorly educated, older, female, rural workers face little prospect of formalization. Fourth, formalization coincides with occupational upgrading.

Suggested Citation

  • Brian McCaig & Nina Pavcnik, 2015. "Informal Employment in a Growing and Globalizing Low-income Country," NBER Working Papers 20891, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:20891
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    References listed on IDEAS

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    1. Rafael La Porta & Andrei Shleifer, 2014. "Informality and Development," Journal of Economic Perspectives, American Economic Association, vol. 28(3), pages 109-126, Summer.
    2. Suresh de Mel & David McKenzie & Christopher Woodruff, 2013. "The Demand for, and Consequences of, Formalization among Informal Firms in Sri Lanka," American Economic Journal: Applied Economics, American Economic Association, vol. 5(2), pages 122-150, April.
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    4. Rafael Dix‐Carneiro, 2014. "Trade Liberalization and Labor Market Dynamics," Econometrica, Econometric Society, vol. 82(3), pages 825-885, May.
    5. Brian McCaig & Nina Pavcnik, 2018. "Export Markets and Labor Allocation in a Low-Income Country," American Economic Review, American Economic Association, vol. 108(7), pages 1899-1941, July.
    6. Maloney, William F., 2004. "Informality Revisited," World Development, Elsevier, vol. 32(7), pages 1159-1178, July.
    7. Brian McCaig & Nina Pavcnik, 2013. "Moving out of Agriculture: Structural Change in Vietnam," NBER Working Papers 19616, National Bureau of Economic Research, Inc.
    8. Rauch, James E., 1991. "Modelling the informal sector formally," Journal of Development Economics, Elsevier, vol. 35(1), pages 33-47, January.
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    11. Brian, McCaig, 2011. "Exporting out of poverty: Provincial poverty in Vietnam and U.S. market access," Journal of International Economics, Elsevier, vol. 85(1), pages 102-113, September.
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    More about this item

    JEL classification:

    • F0 - International Economics - - General
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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