The Determinants of Rising Informality in Brazil: Evidence from Gross Worker Flows

58 Pages Posted: 29 Aug 2007

See all articles by Mariano Bosch

Mariano Bosch

London School of Economics & Political Science (LSE)

Edwin Goni

World Bank

William F. Maloney

World Bank - Poverty and Economic Management Unit; IZA Institute of Labor Economics; World Bank - Development Research Group (DECRG)

Multiple version iconThere are 2 versions of this paper

Date Written: August 2007

Abstract

This paper studies gross worker flows to explain the rising informality in Brazilian metropolitan labor markets from 1983-2002. This period covers two economic cycles, several stabilization plans, a far-reaching trade liberalization, and changes in labor legislation through the Constitutional reform of 1988. Focusing first on cyclical patterns, we confirm Bosch and Maloney's (2006) findings for Mexico that the patterns of worker transitions between formality and informality correspond primarily to the job-to-job dynamics observed in the US and not to the traditional idea of informality constituting the inferior sector of a segmented market. However, we also confirm distinct cyclical patterns of job finding and separation rates that lead to the informal sector absorbing more labor during downturns. Second, focusing on secular movements in gross flows and the volatility of flows, we find the rise in informality to be driven primarily by a reduction in job finding rates in the formal sector. A small fraction of this is driven by trade liberalization, and the remainder seems driven by the rising labor costs and reduced flexibility arising from Constitutional reform.

Keywords: gross worker flows, labor market dynamics, informality, labor costs, trade liberalization

JEL Classification: J23, J38, J63, J65, O17, F16

Suggested Citation

Bosch, Mariano and Pacchioni, Edwin Goni and Maloney, William F., The Determinants of Rising Informality in Brazil: Evidence from Gross Worker Flows (August 2007). IZA Discussion Paper No. 2970. Available at SSRN: https://ssrn.com/abstract=1010635

Mariano Bosch

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Edwin Goni Pacchioni

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

William F. Maloney (Contact Author)

World Bank - Poverty and Economic Management Unit ( email )

1818 H Street NW
Washington, DC 20433
United States
202-473-6340 (Phone)
202-522-0054 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
94
rank
92,570
Abstract Views
786
PlumX Metrics
!

Under construction: SSRN citations while be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information