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Are informal self-employment and informal employment as employee behaviorally distinct labor force states?

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  • Flabbi, Luca
  • Tejada, Mauricio M.

Abstract

The paper performs both a parametric and non-parametric analysis to address a fundamental question in the growing literature using search models to study labor market informality: Should informal self-employment and informal employment as an employee be considered two different labor market states? Both analyses strongly reject equality between the two states, cautioning against aggregating them in a common “informality state”. The parametric model identifies that the variation in informal self-employment income and the short duration of informal employee jobs are the primary factors that contribute to the observed differences between these labor market states.

Suggested Citation

  • Flabbi, Luca & Tejada, Mauricio M., 2023. "Are informal self-employment and informal employment as employee behaviorally distinct labor force states?," Economics Letters, Elsevier, vol. 231(C).
    • Handle: RePEc:eee:ecolet:v:231:y:2023:i:c:s0165176523003038
    DOI: 10.1016/j.econlet.2023.111278
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    1. Bosch, Mariano & Esteban-Pretel, Julen, 2012. "Job creation and job destruction in the presence of informal markets," Journal of Development Economics, Elsevier, vol. 98(2), pages 270-286.
    2. Charlot, Olivier & Malherbet, Franck & Ulus, Mustafa, 2013. "Efficiency in a search and matching economy with a competitive informal sector," Economics Letters, Elsevier, vol. 118(1), pages 192-194.
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    6. Costas Meghir & Renata Narita & Jean-Marc Robin, 2015. "Wages and Informality in Developing Countries," American Economic Review, American Economic Association, vol. 105(4), pages 1509-1546, April.
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    1. Flabbi, Luca & Tejada, Mauricio M., 2023. "Are informal self-employment and informal employment as employee behaviorally distinct labor force states?," Economics Letters, Elsevier, vol. 231(C).

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    More about this item

    Keywords

    Labor market frictions; Search and matching; Informality; Self-employment;
    All these keywords.

    JEL classification:

    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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