On Trade Policy and Workers’ Transition between the Formal and Informal Sectors: An Application to the MENA Region in the Time of Covid-19

Fida Karam () and Chahir Zaki ()
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Fida Karam: Gulf University for Science and Technology
Chahir Zaki: Faculty of Economics and Political Science, Cairo university, Egypt

No 1628, Working Papers from Economic Research Forum

Abstract: This paper looks at the transition of workers in the MENA region between formal and informal jobs during the COVID-19 pandemic, and investigates whether trade policy could be used as a measure to enhance the transition of workers from the informal to the formal sector. We use the Combined COVID-19 MENA Monitor Household Survey constructed by the Economic Research Forum for 5 MENA countries and 11 sectors. We obtain the following results. First, fewer trade restrictions are associated with an increased probability for the worker to become formal and this effect is more pronounced post-pandemic relative to before February 2020. Second, fewer trade restrictions are linked to an increase in the probability of becoming formal for blue collar workers only, with an insignificant effect on white collar workers. Third, fewer trade restrictions are associated with an increase in the probability of men to become formal, with an insignificant effect on women. Last but not least, the effect of trade policy on job formality depends on the sectoral occupation of the individual with the effect being more pronounced in agriculture and manufacturing relative to services sectors.

Pages: 23
Date: 2023-03-20, Revised 2023-03-20
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Published by The Economic Research Forum (ERF)

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