Institutions, informal labor markets, and business cycle volatility

Shapiro, Alan Finkelstein (2015) Institutions, informal labor markets, and business cycle volatility. Economía, 16 (1). 77 - 112. ISSN 1529-7470

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Abstract

I build a business cycle labor search-and-matching model with informal labor markets, which shows that different dimensions of institutional quality have similar effects on the size of the informal sector, but different effects on the relationship between informality and long-run macroeconomic outcomes and between informality and labor market volatility. For the same change in informal sector size, changes in different proxies for institutional quality have contrasting quantitative implications for the steady state and the volatility of the labor market, despite having similar consequences on other macroeconomic variables. These results highlight the importance of identifying the source behind changes in the size of the informal sector to characterize the link between informality and business cycle dynamics.

Item Type:	Article
Official URL:	https://economia.lse.ac.uk/
Additional Information:	© 2015 LACTEA
Divisions:	LSE
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HB Economic Theory H Social Sciences > HD Industries. Land use. Labor
JEL classification:	E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E24 - Macroeconomics: Employment; Unemployment; Wages; Intergenerational Income Distribution (includes wage indexation) E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E26 - Informal Economy; Underground Economy E - Macroeconomics and Monetary Economics > E0 - General > E00 - General
Date Deposited:	05 Jul 2024 11:54
Last Modified:	14 Sep 2024 10:04
URI:	http://eprints.lse.ac.uk/id/eprint/123408

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