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Local Multipliers and the Informal Sector in Mexico 2000-2010

  • Isidro Soloaga

    ()

    (Department of Economics, Universidad Iberoamericana, Mexico City. Mexico)

  • Mariana Pereira

This paper analyzes local multipliers and the relation between tradable job creation and informality in Mexico. Building upon local multipliers analysis, and taking into consideration agglomeration economies as well as general equilibrium effects, if finds that a new job in the tradable sector traduces into three new jobs in the nontradable sector. Half of these jobs occur in the informal sector, which is not a desirable outcome considering the low tax collection and vulnerability to labor market shocks associated to informality. Considering the skill composition of the tradable sector, individuals with some college or more have a much higher multiplier over nontradable jobs compared to other skill levels. There are asymmetric effects in terms of the multiplier as negative shocks (job losses) have higher effects.

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Paper provided by Universidad Iberoamericana, Department of Economics in its series Working Papers with number 0513.

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Date of creation: 2013
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Handle: RePEc:uic:wpaper:0513
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  1. Gerardo Esquivel Hernández & Juan Luis Ordaz-Díaz, 2008. "¿Es la política social una causa de la informalidad en México?," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(1), pages 1-32, May.
  2. Arias, Javier & Azuara, Oliver & Bernal, Pedro & Heckman, James & Villarreal, Cajeme, 2010. "Policies to Promote Growth and Economic Efficiency in Mexico," MPRA Paper 20414, University Library of Munich, Germany.
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  8. Fortin, Bernard & Marceau, Nicolas & Savard, Luc, 1997. "Taxation, wage controls and the informal sector," Journal of Public Economics, Elsevier, vol. 66(2), pages 293-312, November.
  9. Cortez, Willy W., 2001. "What is Behind Increasing Wage Inequality in Mexico?," World Development, Elsevier, vol. 29(11), pages 1905-1922, November.
  10. Sebastian Galiani & Federico Weinschelbaum, 2007. "Modeling Informality Formally: Households and Firms," CEDLAS, Working Papers 0047, CEDLAS, Universidad Nacional de La Plata.
  11. Abhijit V. Banerjee & Andrew F. Newman, 1990. "Occupational Choice and the Process of Development," Discussion Papers 911, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  12. Enrico Moretti & Per Thulin, 2013. "Local multipliers and human capital in the United States and Sweden," Industrial and Corporate Change, Oxford University Press, vol. 22(1), pages 339-362, February.
  13. Dan Black & Terra McKinnish & Seth Sanders, 2005. "The Economic Impact Of The Coal Boom And Bust," Economic Journal, Royal Economic Society, vol. 115(503), pages 449-476, 04.
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