Labor Clauses in Preferential Trade Agreements: How Do They Affect Informality?

Bellakhal Rihab (), Kheder Sonia Ben () and Haffoudhi Houda ()
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Bellakhal Rihab: University of Carthage, IHEC, Tunisia; L.R. MASE, ESSAI, University of Carthage, Tunisia, Postal: Professor, University of Carthage, IHEC, Rue Victor Hugo 2016, Carthage-Présidence, Tunisia.
Kheder Sonia Ben: University of Jendouba, FSJEGJ, Tunisia; U.R. DEFI, ESSECT, University of Tunis, Tunisia, Postal: Associate Professor, University of Jendouba, FSJEGJ, Campus Universitaire de Jendouba, Avenue de l'U.M.A., 8189.
Haffoudhi Houda: L.R. MASE, ESSAI, University of Carthage, Tunisia; University of Carthage, FSEGN, Tunisia, Postal: Associate Professor, University of Carthage, FSEGN, Campus Universitaire Mrezga Route Hammamet 8000, Tunisia

Journal of Economic Integration, 2025, vol. 40, issue 2, 437-467

Abstract: We study the effect of the labor clauses (LCs) in preferential trade agreements (PTAs) on the informal economy. Using a sample comprising 112 countries for the period 2000-2017, we show that PTAs increase informality in low- and middle-income economies (LMIEs), regardless of whether LCs are included or not. This result is confirmed when accounting for the heterogeneity of parties to the agreement. Finally, PTAs with LCs whose implementation relies on deep cooperation mechanisms decrease informality in LMIEs when their partners are high-income economies. The policy implication is that LMIEs should foster the integration of LCs enforced through deep cooperation mechanisms.

Keywords: Preferential Trade Agreements; Labor Clauses; Informal Economy (search for similar items in EconPapers)
JEL-codes: E26 F13 F14 F16 O17 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0951

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