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Labor Earnings Dynamics in a Developing Economy with a Large Informal Sector

Cezar Santos (), Felipe Iachan () and Diego B. P. Gomes

Working Papers from Banco de Portugal, Economics and Research Department

Abstract: We study labor earnings dynamics in a developing economy with a large informal sector. We use nationally representative Brazilian panel data that cover both formal and informal workers. We document large disparities in earnings fluctuations faced by these segments of the labor market, as well as the high frequency of transitions between them. Informality is associated with more volatile earnings, while workers in the formal sector are subject to significant downside risk. Transitions between formal and informal employment bring large asymmetric earnings shocks and have a frequency that depends on age and the initial earnings level.

JEL-codes: E24 E26 J24 J31 O17 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-iue and nep-mac
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