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Are labor markets in developing countries dualistic?, Volume 1
Author:Maloney, William F.; Country:Mexico;
Date Stored:1998/06/01Document Date:1998/06/30
Document Type:Policy Research Working PaperSubTopics:Environmental Economics & Policies; Work & Working Conditions; Labor Standards; Banks & Banking Reform; Health Monitoring & Evaluation; Labor Policies
Language:EnglishMajor Sector:(Historic)Social Protection
Region:Latin America & CaribbeanReport Number:WPS1941
Sub Sectors:Labor Markets & EmploymentCollection Title:Policy, Research working paper ; no. WPS 1941
Volume No:1  

Summary: There is a long tradition of viewing as disadvantaged the roughly 40 percent of workers in developing countries who are unprotected by labor legislation and work in small "informal" firms. The author offers an alternative to traditional views of the relationship between formal and informal labor markets: For many workers, inefficiencies in present labor codes and relatively low levels of human capital (labor productivity) may make employment in the informal sector more desirable. He offers the first study of worker transitions among sectors, using detailed panel data from Mexico, and finds little evidence to support the traditional dualistic view. He shows that traditional earning differentials cannot prove or disprove segmentation in developing countries, and patterns of worker mobility do not suggest a rigid labor market -- or one segmented into formal and informal divisions. It is possible that the market is dualistic in the sense used in the industrial world, but the division between good jobs and bad jobs seems to cut across issues of formality.

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