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Trade, informal employment and labor adjustment costs, Volume 1
 
Author:Arias, Javier; Artuc, Erhan; Lederman, Daniel; Rojas, Diego; Country:World;
Date Stored:2013/09/20Document Date:2013/09/01
Document Type:Policy Research Working PaperSubTopics:Economic Theory & Research; Work & Working Conditions; Labor Standards; Labor Markets; Labor Policies
Language:EnglishMajor Sector:Industry and trade
Rel. Proj ID:1W-Trade Policy, Labor Adjustment And Development -- -- P143178;Region:The World Region
Report Number:WPS6614Sub Sectors:Other domestic and international trade
Collection Title:Policy Research working paper ; no. WPS 6614TF No/Name:TF013527-Trade Policy, Labor Adjustment and Development
Volume No:1  

Summary: Informal employment is ubiquitous in developing countries, but few studies have estimated workers' switching costs between informal and formal employment. This paper builds on the empirical literature grounded in discrete choice models to estimate these costs. The results suggest that inter-industry labor mobility costs are large, but entry costs into informal employment are significantly lower than the costs of entry in formal employment. Simulations of labor-market adjustments caused by a trade-related fall in manufacturing goods prices indicate that the share of informally employed workers rises after liberalization, but this is due to entry into the labor market by previously idle labor.

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