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Trade, informal employment and labor adjustment costs
 
Author:Arias, Javier; Artuc, Erhan; Lederman, Daniel; Rojas, Diego; Collection Title:Policy Research working paper ; no. WPS 6614
Country:World; Date Stored:2013/09/20
Document Date:2013/09/01Document Type:Policy Research Working Paper
SubTopics:Economic Theory & Research; Work & Working Conditions; Labor Standards; Labor Markets; Labor PoliciesLanguage:English
Major Sector:Industry and tradeRel. Proj ID:1W-Trade Policy, Labor Adjustment And Development -- -- P143178;
Region:The World RegionReport Number:WPS6614
Sub Sectors:Other domestic and international tradeTF No/Name:TF013527-Trade Policy, Labor Adjustment and Development
Volume No:1 of 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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