Rafael Dix-Carneiro (Duke)
Kalai Family Workshop in Applied Microeconomics
Aug 28 2018
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“Trade and Informality in the Presence of Labor Market Frictions and Regulations”
Abstract: Motivated by recent work on the labor market effects of trade, we build a model of trade with labor market frictions and regulations that are not perfectly enforced. Heterogeneous firms decide whether to operate formally or informally, allowing for a link between globalization, informality and unemployment. We estimate the model using several data sources, including matched employer-employee data from formal and informal firms and workers in Brazil. We perform counterfactual analyses to understand how increasing trade openness affects informality, unemployment and welfare under different scenarios of labor market regulations and levels of enforcement.