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Title:The persistence of informality: Evidence from panel data PDF Logo
Authors:Akay, Alpaslan
Khamis, Melanie
Issue Date:2011
Series/Report no.:Discussion Paper series, Forschungsinstitut zur Zukunft der Arbeit 6163
Abstract:Informality is a growing phenomenon in the developing and transition country labor market context. In particular, it is noticeable that working in an informal employment relationship is often not temporary. The degree of persistence of informality in the labor market might be due to different sources: structural state dependence due to past informality experiences and spurious state dependence due to time-invariant unobserved individual effects, which can alter the propensity of being in the informal sector independently from actual informality experiences. The purpose of our paper is to study the dynamics of informality using a genuine panel data set in the Ukrainian labor market. By estimating a dynamic panel data probit model with endogenous initial conditions, we find a highly significant degree of persistence due to previous informality experiences. This result implies that policies attempting to reduce current levels of informality may have a long-lasting effect on the labor market.
Subjects:informality
unobserved heterogeneity
state dependence
transition countries
JEL:D60
I31
Persistent Identifier of the first edition:urn:nbn:de:101:1-2012010913906
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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