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The impacts of trade liberalization on informal labor markets: an evaluation of the Brazilian case

Lourenco Paz

MPRA Paper from University Library of Munich, Germany

Abstract: Several developing countries that underwent trade liberalization experienced an increase in the share of informal workers in manufacturing industries. This phenomenon deserves careful examination because informal jobs are not only generally viewed as low-quality and low-paying jobs, but they also account for more than 30% of the workforce in some countries. In this paper, I examine the effects of the Brazilian trade liberalization episode (1989-2001) on the industry-level share of informal workers and on the average formal and informal wages. I find that a percentage point decrease in import tariffs increases the informality share by 0.09 percentage points and the average informal wage by 0.06%, and decreases the average formal wage by 0.05%. A similar change in foreign import tariffs decreases the informality share by 0.17 percentage points and the average informal wage by 0.34%, and increases the average formal wage by 0.32%. The results are found to be robust to endogeneity and self-selection concerns, which are addressed using instrumental variables and a switching regressions approach.

Keywords: informal labor markets; trade liberalization; Brazil (search for similar items in EconPapers)
JEL-codes: F12 F16 H26 O17 (search for similar items in EconPapers)
Date: 2012-03-12
New Economics Papers: this item is included in nep-int, nep-iue, nep-lab and nep-lam
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed

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Related works:
Working Paper: The effect of trade liberalization on payroll tax evasion and labor informality (2012) Downloads
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