Labor Market Structure in Ldcs: Time Series Evidence on Competing Views

International Bank for Reconstruction and Development Working Paper No. 1940

25 Pages Posted: 3 May 1998

See all articles by William F. Maloney

William F. Maloney

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

Date Written: May 29, 1997

Abstract

This paper reexamines the dualistic view of LDC labor markets by studying the dynamics between "formal" and "informal" labor markets across a business cycle and a period of trade liberalization in Mexico, 1987-1993. Conventional earnings comparisons, even across time, are shown to be unreliable tests for segmentation. The paper test for, and finds, evidence of queuing to enter formal employment. However, transitions into informality, the size of the informal sector, and levels of mobility in all directions are shown to be pro-cyclical. Overall, the informal sector behaves as an unregulated entrepreneurial sector, rather than the disadvantaged sector of a dualistic labor market. There is evidence for increased subcontracting over time with trade liberalization although it is not clear that workers are worse off.

JEL Classification: J31, J21, J62, 017

Suggested Citation

Maloney, William F., Labor Market Structure in Ldcs: Time Series Evidence on Competing Views (May 29, 1997). International Bank for Reconstruction and Development Working Paper No. 1940. Available at SSRN: https://ssrn.com/abstract=82948 or http://dx.doi.org/10.2139/ssrn.82948

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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