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

58 Pages Posted: 20 Apr 2016

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: October 1, 2007

Abstract

This paper studies gross worker flows to explain the rising informality in Brazilian metropolitan labor markets from 1983 to 2002. This period covers two economic cycles, several stabilization plans, a far-reaching trade liberalization, and changes in labor legislation throughthe Constitutional reform of 1988. First, focusing on cyclical patterns, the authors confirm that for Brazil, the patterns of worker transitions between formality and informality correspond primarily to the job-to-job dynamics observed in the United States, and not to the traditional idea of the informal queuing for jobs in a segmented market. However, the analysis also confirms 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, the paper finds 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 rising labor costs and reduced flexibility arising from Constitutional reform.

Keywords: Labor Markets, Labor Policies, Population Policies, Health Monitoring & Evaluation

Suggested Citation

Bosch, Mariano and Pacchioni, Edwin Goni and Maloney, William F., The Determinants of Rising Informality in Brazil: Evidence from Gross Worker Flows (October 1, 2007). World Bank Policy Research Working Paper Series, Vol. , pp. -, 2007. Available at SSRN: https://ssrn.com/abstract=1021107

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

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