Description: Trade, Informal Employment and Labor Adjustment Costs

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Trade, Informal Employment and Labor Adjustment Costs

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 esti...

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Bibliographic Details
Main Authors:	Arias, Javier, Artuc, Erhan, Lederman, Daniel, Rojas, Diego
Language:	English en_US
Published:	World Bank, Washington, DC 2014
Subjects:	ADJUSTMENT PROCESS AGRICULTURE AVERAGE WAGE AVERAGE WAGES COMPARATIVE ADVANTAGE COMPARATIVE ANALYSIS CONSUMER PRICE INDEX DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DISCOUNTED VALUE DISCUSSIONS DISPLACEMENT DRIVERS ECONOMETRICS ECONOMIC RESEARCH ECONOMIC SECTORS ECONOMICS EMPLOYMENT INCREASES EMPLOYMENT SHARE EMPLOYMENT STATUS ENTREPRENEURIAL ABILITY ENTRY COST ENTRY COSTS EXCESSIVE REGULATION EXPECTED VALUES EXPECTED WAGES EXPORTS GENERAL EQUILIBRIUM HAZARDS HOUSEHOLD SURVEY HUMAN CAPITAL INFORMAL ECONOMY INFORMAL EMPLOYMENT INFORMAL SECTOR INTERNATIONAL TRADE JOBS LABOR ADJUSTMENT LABOR ADJUSTMENT COSTS LABOR ALLOCATION LABOR ALLOCATIONS LABOR DEMAND LABOR FLOW LABOR FORCE LABOR MARKET LABOR MARKET RIGIDITIES LABOR MARKETS LABOR MOBILITY LABOR REALLOCATION LABOR SHARE LABOR SUPPLY LABOUR MALE WORKERS MANUFACTURING INDUSTRY OCCUPATIONAL MOBILITY OPPORTUNITY COST OPTIMIZATION PREVIOUS SECTION PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTIVITY PROPERTY RIGHTS REAL WAGE REAL WAGES RISK NEUTRAL SALARIED WORKERS SECURE PROPERTY RIGHTS SOCIAL PROTECTION SOCIAL SECURITY TOTAL EMPLOYMENT TRADE LIBERALIZATION TRADE POLICY TRADE REFORMS UNEMPLOYED UNEMPLOYMENT VALUE ADDED WAGE BILL WAGE GAP WAGE INEQUALITY WORK IN PROGRESS WORKER WORKERS WORKING WORKING CONDITIONS
Online Access:	http://documents.worldbank.org/curated/en/2013/09/18279475/trade-informal-employment-labor-adjustment-costs http://hdl.handle.net/10986/16841

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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.