Labor Market Institutions and Informality in Transition and Latin American Countries

Quaderni DSE Working Paper N° 854

47 Pages Posted: 23 Nov 2012

See all articles by Hartmut Lehmann

Hartmut Lehmann

University of Bologna - School of Economics, Management, and Statistics; IZA Institute of Labor Economics

Alexander Muravyev

Saint Petersburg Branch National Research University Higher School of Economics; Institute for the Study of Labor (IZA)

Multiple version iconThere are 2 versions of this paper

Date Written: November 20, 2012

Abstract

This paper analyzes, using country-level panel data from transition economies and Latin America, the impact of labor market institutions on informal economic activity. The measure of informal economic activity is taken from Schneider et al. (2010), the most comprehensive study to date. The data on institutions, which cover employment protection legislation (EPL), the tax wedge, the unemployment benefit level, unemployment benefit duration and union density, are assembled at the IZA (transition countries) and the World Bank (LAC countries). We find that a more regulated labor market (higher EPL) increases the size of the informal economy. There is also evidence that a larger tax wedge increases informality. The tax wedge elasticity of informal economy, when evaluated at the sample mean, is rather modest, around 0.1%. Our results are broadly in line with the literature, which identifies labor market regulation and the tax wedge as important drivers of informality.

Keywords: labor market institutions, informality, macroeconometric regressions, transition countries, Latin America

JEL Classification: E24, J21, J42, O17, P20

Suggested Citation

Lehmann, Hartmut F. and Muravyev, Alexander, Labor Market Institutions and Informality in Transition and Latin American Countries (November 20, 2012). Quaderni DSE Working Paper N° 854. Available at SSRN: https://ssrn.com/abstract=2178483 or http://dx.doi.org/10.2139/ssrn.2178483

Hartmut F. Lehmann (Contact Author)

University of Bologna - School of Economics, Management, and Statistics ( email )

Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy

IZA Institute of Labor Economics

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

Alexander Muravyev

Saint Petersburg Branch National Research University Higher School of Economics ( email )

Kantemirovskaya str. 3a
St. Petersburg, 194000
Russia

HOME PAGE: http://https://www.hse.ru/en/org/persons/127811036

Institute for the Study of Labor (IZA) ( email )

Schaumburg-Lippe-Str. 5-9
Bonn, D-53113
Germany

HOME PAGE: http://www.iza.org/en/webcontent/index_html

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
73
Abstract Views
634
rank
283,809
PlumX Metrics