Cyclical Movements in Unemployment and Informality in Developing Countries
53 Pages Posted: 5 Jun 2008
There are 2 versions of this paper
Cyclical Movements in Unemployment and Informality in Developing Countries
Date Written: May 2008
Abstract
This paper analyzes the cyclical properties of worker flows in Brazil and Mexico, two important developing countries with large unregulated or "informal" sectors. It generates three stylized facts that are critical to the accurate modeling of the sector and which suggest the need to rethink the approaches to date. First, the unemployment rate is countercyclical essentially because job separations of informal workers increase dramatically in recessions. Second, the share of formal employment is countercyclical because of the difficulty of finding formal jobs from inactivity, unemployment and other informal jobs during recessions rather than because of increased separation from formal jobs. Third, flows from formality into informality are not countercyclical, but, if anything, pro-cyclical. Together, these challenge the conventional wisdom that has guided the modeling the sector that informal workers are primarily those rationed out of the formal labor market. They also offer a new synthesis of the mechanics of the cyclical adjustment process. Finally, the paper offers estimates of the moments of worker flows series that are needed for calibration.
Keywords: gross worker flows, labor market dynamics, informality, developing countries
JEL Classification: J41, J42, J6
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Mobility in the Urban Labor Market: A Panel Data Analysis for Mexico
By Xiaodong Gong, Arthur van Soest, ...
-
Mobility in the Urban Labor Market: A Panel Data Analysis for Mexico
By Xiaodong Gong, Arthur van Soest, ...
-
Enforcement of Regulation, Informal Labor and Firm Performance
-
Wage Differentials and Mobility in the Urban Labor Market: A Panel Data Analysis for Mexico
By Xiaodong Gong and Arthur van Soest
-
By Tito Boeri and Pietro Garibaldi
-
Enforcement of Labor Regulation, Informal Labor, and Firm Performance
-
By Aureo De Paula and José A. Scheinkman
-
By Aureo De Paula and José A. Scheinkman
-
Shadow Activity and Unemployment in a Depressed Labour Market
By Tito Boeri and Pietro Garibaldi
-
By Pablo Fajnzylber, William F. Maloney, ...