Do Workers in Chile Choose Informal Employment? A Dynamic Analysis of Sector Choice
The degree to which a labor market is segmented and jobs in the formal sector of the economy are rationed is critical to the analysis of coverage of social insurance and pensions. Using unique panel data spanning the 1998-99 contraction in Chile, t...
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2007/05/7585352/workers-chile-choose-informal-employment-dynamic-analysis-sector-choice http://hdl.handle.net/10986/7121 |
| Summary: | The degree to which a labor market is
segmented and jobs in the formal sector of the economy are
rationed is critical to the analysis of coverage of social
insurance and pensions. Using unique panel data spanning the
1998-99 contraction in Chile, the author finds little
evidence that self-employment is the residual sector of a
dualistic labor market, as is often depicted in the
literature. Data on transitions between sectors show that
self-employment is not a free-entry sector, and that
entrepreneurs can be "pushed" out of
self-employment just as others are pushed out of formal
employment during economic downturns. But employment without
a contract does exhibit many of the features of the
free-entry, employment safety net depicted in the dualistic
literature. An annex to this paper presents supportive
evidence from static analysis of selection-corrected wage
differentials and a comment on the drawbacks of this approach. |
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