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Trade Liberalization And Informality: New Stylized Facts

  • Marco Fugazza
  • Norbert Fiess

The relationship between trade liberalization and informal activity has not received the attention, whether theoretical or empirical, that it may deserve. The conventional view posits that trade liberalization would cause a rise in informality. This paper uses three different data sets to assess the sign of the relationship. Empirical results provide a mixed picture. Macro-founded data tend to produce results supporting the conventional view; micro-founded data do not. Empirical results also suggest that while informal output increases with deeper trade liberalization, informal employment falls.

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Paper provided by United Nations Conference on Trade and Development in its series UNCTAD Blue Series Papers with number 43.

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Date of creation: 2010
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Handle: RePEc:unc:blupap:43
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