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Trade and Informality in the Presence of Labor Market Frictions and Regulations

Author

Listed:
  • Rafael Dix-Carneiro

    (Duke University)

Abstract

Motivated by recent work on the labor market effects of trade, we build a model of trade with labor market frictions and regulations that are not perfectly enforced. Heterogeneous firms decide whether to operate formally or informally, allowing for a link between globalization, informality and unemployment. We estimate the model using several data sources, including matched employer-employee data from formal and informal firms and workers in Brazil. We perform counterfactual analyses to understand how increasing trade openness affects informality, unemployment and welfare under different scenarios of labor market regulations and levels of enforcement.

Suggested Citation

  • Rafael Dix-Carneiro, 2019. "Trade and Informality in the Presence of Labor Market Frictions and Regulations," 2019 Meeting Papers 144, Society for Economic Dynamics.
    • Handle: RePEc:red:sed019:144
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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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