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Trade Liberalization And Informality: New Stylized Facts

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  • Marco Fugazza
  • Norbert Fiess

Abstract

The relationship between trade liberalization and informal activity has not received the attention, whether theoretical or empirical, that it may deserve. The conventional view posits that trade liberalization would cause a rise in informality. This paper uses three different data sets to assess the sign of the relationship. Empirical results provide a mixed picture. Macro-founded data tend to produce results supporting the conventional view; micro-founded data do not. Empirical results also suggest that while informal output increases with deeper trade liberalization, informal employment falls.

Suggested Citation

  • Marco Fugazza & Norbert Fiess, 2010. "Trade Liberalization And Informality: New Stylized Facts," UNCTAD Blue Series Papers 43, United Nations Conference on Trade and Development.
    • Handle: RePEc:unc:blupap:43
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    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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