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Unfolding Trade Effect in Two Margins of Informality. The Peruvian Case.
- Source :
- World Bank Economic Review; Feb2022, Vol. 36 Issue 1, p141-170, 30p
- Publication Year :
- 2022
-
Abstract
- This paper studies the effect of an increase in import competition on informality along two margins. It considers the extensive margin , where workers are hired by unregistered employers, and the intensive margin , where even though jobs are carried out by registered firms, employees are off the books. Peru's relentless informal employment and its unprecedented trade-driven growth provides an ideal case study. Using a rich household survey, this study finds that exposure to trade impacts on informality through two competing and contrasting mechanisms. On the one hand, extensive-informal employment declines as unregistered employers shrink or exit due to their low productivity. On the other hand, intensive-informal employment rises as registered employers reduce costs by hiring informal workers. Furthermore, results suggest that the intensive margin drives the overall effect. Hence, trade liberalization increases informality. [ABSTRACT FROM AUTHOR]
- Subjects :
- FREE trade
HOUSEHOLD surveys
EMPLOYERS
INTERNATIONAL trade
EMPLOYMENT
INFORMAL sector
Subjects
Details
- Language :
- English
- ISSN :
- 02586770
- Volume :
- 36
- Issue :
- 1
- Database :
- Complementary Index
- Journal :
- World Bank Economic Review
- Publication Type :
- Academic Journal
- Accession number :
- 155188786
- Full Text :
- https://doi.org/10.1093/wber/lhab023