Heterogeneous firms and informality: the effects of trade liberalization on labour markets

Dennis Becker

Oxford Economic Papers, 2018, vol. 70, issue 1, 47-72

Abstract: The informal sector is often seen as a way for firms to evade regulation. In this paper, I therefore investigate the role of the informal sector in the impact of trade liberalization on employment, wage inequality and welfare in a model of trade with heterogeneous firms and endogenous wage dispersion. The findings suggest that trade liberalization reduces informal employment unambiguously. Contrary to the extant literature, however, its impact on total salaried employment, wage inequality and welfare is country-specific.

JEL-codes: F12 F16 O17 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (6)

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