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Do workers in Chile choose informal employment? A dynamic analysis of sector choice

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  • Packard, Truman G.

Abstract

The degree to which a labor market is segmented and jobs in the formal sector of the economy are rationed is critical to the analysis of coverage of social insurance and pensions. Using unique panel data spanning the 1998-99 contraction in Chile, the author finds little evidence that self-employment is the residual sector of a dualistic labor market, as is often depicted in the literature. Data on transitions between sectors show that self-employment is not a free-entry sector, and that entrepreneurs can be"pushed"out of self-employment just as others are pushed out of formal employment during economic downturns. But employment without a contract does exhibit many of the features of the free-entry, employment safety net depicted in the dualistic literature. An annex to this paper presents supportive evidence from static analysis of selection-corrected wage differentials and a comment on the drawbacks of this approach.

Suggested Citation

  • Packard, Truman G., 2007. "Do workers in Chile choose informal employment? A dynamic analysis of sector choice," Policy Research Working Paper Series 4232, The World Bank.
  • Handle: RePEc:wbk:wbrwps:4232
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    Citations

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    Cited by:

    1. Pagés, Carmen & Stampini, Marco, 2009. "No education, no good jobs? Evidence on the relationship between education and labor market segmentation," Journal of Comparative Economics, Elsevier, vol. 37(3), pages 387-401, September.
    2. Richard B. Freeman, 2009. "Labor Regulations, Unions, and Social Protection in Developing Countries: Market distortions or Efficient Institutions?," NBER Working Papers 14789, National Bureau of Economic Research, Inc.
    3. Beccaría, Luis Alberto & Groisman, Fernando, 2015. "Informality and labour market segmentation: the case of Argentina," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    4. Colin C. Williams, 2013. "Evaluating cross-national variations in the extent and nature of informal employment in the European Union," Industrial Relations Journal, Wiley Blackwell, vol. 44(5-6), pages 479-494, November.
    5. Casal, María del Pilar & Barham, Bradford L., 2013. "Motherhood wage penalties and labour market segmentation: Evidence from Argentina," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    6. Hanan Nazier & Racha Ramadan, 2015. "Informality and Poverty: A Causality Dilemma with Application to Egypt," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 5(4), pages 1-4.
    7. Goktuna, Bilge Ozturk & Dayangac, Renginar, 2011. "Rethinking the informal labour from an evolutionary point of view," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(5), pages 609-615.

    More about this item

    Keywords

    Labor Markets; Labor Standards; Work&Working Conditions; Labor Management and Relations; Educational Policy and Planning;

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