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Title:Cyclical movements in unemployment and informality in developing countries PDF Logo
Authors:Bosch, Mariano
Maloney, William F.
Issue Date:2008
Series/Report no.:IZA Discussion Papers 3514
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.
Subjects:Gross worker flows
labor market dynamics
informality
developing countries
JEL:J41
Persistent Identifier of the first edition:urn:nbn:de:101:1-2008060591
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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