NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Response of the Informal Sector to Trade Liberalization

Pinelopi K. Goldberg, Nina Pavcnik

NBER Working Paper No. 9443
Issued in January 2003
NBER Program(s):   ITI

This paper studies the relationship between trade liberalization and informality. It is often claimed that increased foreign competition in developing countries leads to an expansion of the informal sector, defined as the sector that does not comply with labor market legislation. Using data from two countries that experienced large trade barrier reductions in the 1980's and 1990's, Brazil and Colombia, we examine the response of the informal sector to liberalization. In Brazil, we find no evidence of a relationship between trade policy and informality. In Colombia, we do find evidence of such a relationship, but only for the period preceding a major labor market reform that increased the flexibility of the Colombian labor market. These results point to the significance of labor market institutions in assessing the effects of trade policy on the labor market.

download in pdf format
   (378 K)

email paper

This paper is available as PDF (378 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w9443

Published: Goldberg, Pinelope Koujianou and Nina Pavcnik. "The Response of the Informal Sector to Trade Liberalization," Journal of Development Economics 72(2): 43-496, December 2003

Users who downloaded this paper also downloaded these:
Azuma and Grossman w8823 A Theory of the Informal Sector
de Paula and Scheinkman w13486 The Informal Sector
Freeman w14789 Labor Regulations, Unions, and Social Protection in Developing Countries: Market distortions or Efficient Institutions?
Attanasio, Goldberg, and Pavcnik w9830 Trade Reforms and Wage Inequiality in Colombia
Goldberg and Pavcnik w12885 Distributional Effects of Globalization in Developing Countries
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us