The aim of this paper is to quantify the role of formal-sector institutions in shaping the demand for human capital and the level of informality. We propose a firm dynamics model where firms face capital market imperfections and costs of operating in the formal sector. Formal firms have a larger...

Levy (2008) has suggested that the expansion of non-targeted social programs could be inducing an increase in economic informality in countries like Mexico. This hypothesis, however, assumes the existence of integrated and competitive labor markets in the economy. In this work we test this...

According to the existing literature, informality rates for Russia vary in a wide range from slightly more than 5 to nearly 30%. The question arises: what are the causes and consequences of such a huge variation? Using RMLS data for 2009 the author investigates the degree of congruence between...

While several studies have documented the expansion of the informal sector and its detrimental impact on development, few have noted that informality and wage inequality tend to move together. Using Mexico as a case study, I show that between 1987 and 2002 wage inequality within informal workers...

This paper examines the earnings penalties and premiums associated with different types of employment in 73 countries. Workers are divided into four categories: non-professional own-account workers, employers and own-account professionals, informal wage employees, and formal wage employees....

This paper analyzes the participation path of workers in the formal and informal sectors throughout their lives and their pension eligibilities, as well as how the social security scheme can change the aforementioned participation path. High levels of informality have impacts on the benefits...

This chapter reviews what economists have learned about the impact of labor market institutions, defined broadly as government regulations and union activity on labor outcomes in developing countries. It finds that: (1) Labor institutions vary greatly among developing countries but less than...

We estimate wage differentials across different segments of the Mexican urban labor market. We use a panel sample of individuals which allows us to control for workers' observable and non-observable characteristics, by focusing on wage changes reported by individuals who move from one sector to...

The main objective of this paper is to highlight the determinants of informal sector activity with a special focus on informal self-employment opposed to informal wage employment. For this purpose we build a theoretical framework to show the important role of education in occupational choice. To...