What Aspects of Formality Do Workers Value? Evidence from a Choice Experiment in Bangladesh

40 Pages Posted: 21 May 2019

See all articles by Minhaj Mahmud

Minhaj Mahmud

Bangladesh Institute of Development Studies (BIDS)

Italo A. Gutierrez

Independent Consultant

Krishna Kumar

RAND Corporation - Labor and Population

Shanthi Nataraj

RAND Corporation

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Abstract

Using a choice experiment among 2,000 workers in Bangladesh, we to elicit willingness to pay (WTP) for specific job benefits typically associated with formal employment. We find that workers value job stability the most; the average worker would be willing to forego a 27 percent increase in monthly income in order to obtain a 1-year written contract (relative to no contract), or to forego a 12 percent increase to obtain thirty days of termination notice. On average, government workers place a higher value on contracts than do private sector employees, while casual workers particularly value higher pay. Our use of choice experiments to overcome the challenges associated with estimating WTP for specific job benefits from hedonic wage regressions or from observed job transitions is of interest in its own right, especially in a developing country context where data on worker transitions are unavailable and many workers are informally employed.

Keywords: informality, worker benefits, discrete choice experiments

JEL Classification: J46, J32, J81

Suggested Citation

Mahmud, Minhaj and Gutierrez, Italo A. and Kumar, Krishna and Nataraj, Shanthi, What Aspects of Formality Do Workers Value? Evidence from a Choice Experiment in Bangladesh. IZA Discussion Paper No. 12121, Available at SSRN: https://ssrn.com/abstract=3390108

Minhaj Mahmud (Contact Author)

Bangladesh Institute of Development Studies (BIDS) ( email )

E-17, Agargao, Shere Bangla Nagar
Dhaka, 1207
Bangladesh

Italo A. Gutierrez

Independent Consultant ( email )

Krishna Kumar

RAND Corporation - Labor and Population ( email )

United States

Shanthi Nataraj

RAND Corporation ( email )

1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407-2138
United States
310-393-0411 (Phone)

HOME PAGE: http://www.rand.org/

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