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Labor Informality and Market Segmentation in Senegal

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  • Rodriguez Castelan,Carlos
  • Vazquez,Emmanuel Jose

Abstract

Understanding the selection of workers into informality is a policy priority to designprograms to increase formalization across Sub-Saharan Africa, where nine out of ten workers are informal. Thispaper estimates a model of self-selection with entry barriers into the formal sector to identify the extent ofinvoluntary informality in Senegal, a representative country in terms of levels of informality in West Africa and withone of the most rigid labor markets in the world. The results show that the desire of being formal is greater forworkers with formal education, married, and a lower proportion of children younger than age five living in thehousehold. The individual's preference for the formal sector also grows with age at a decreasing rate. The resultsalso show that labor informality is mainly a voluntary phenomenon, with 30 percent of informal workers beinginvoluntarily displaced into the informal sector. The results are robust to different model specifications,definitions of labor informality, and heterogeneous groups of workers.

Suggested Citation

  • Rodriguez Castelan,Carlos & Vazquez,Emmanuel Jose, 2022. "Labor Informality and Market Segmentation in Senegal," Policy Research Working Paper Series 10129, The World Bank.
    • Handle: RePEc:wbk:wbrwps:10129
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    More about this item

    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • N37 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Africa; Oceania

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