Finance and Employment Formalization: Evidence from Mexico's ENIGH, 2000-2016

Santiago Bazdresch (cbazdreschb@banxico.org.mx)

No 2018-14, Working Papers from Banco de México

Abstract: We study the relationship between financial constraints and employment formalization by exploiting heterogeneity in the industry-level degree of financial dependence, in the spirit of Rajan and Zingales (1998). This dependence, and variation in aggregate credit, lets us measure industry-level financial slack, and estimate its effects on employment formality. We find formality among young workers increases, which is consistent with a model of informal firms that grow and formalize with financial resources, thus becoming more productive. However, we find that financial slack, apparently, decreases formality among older, experienced workers, which is consistent with a model of capital-constrained formal employees that turn into entrepreneurs when financial conditions improve. Descriptive statistics on formality, as well as regression estimates conditioning by age and schooling provide a detailed map of the differential effects of finance on formality.

JEL-codes: G2 J46 O11 O12 O16 (search for similar items in EconPapers)
Date: 2018-08
New Economics Papers: this item is included in nep-iue and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.banxico.org.mx/publications-and-press/ ... -D1EB5FE6A2F0%7D.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bdm:wpaper:2018-14

Access Statistics for this paper

More papers in Working Papers from Banco de México Contact information at EDIRC.
Bibliographic data for series maintained by Subgerencia de desarrollo de sistemas (iec-sbgdesdesistemas-subgerente04b@banxico.org.mx).