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Informal work along the business cycle: evidence from Argentina

Julien Albertini
Julien Albertini
, 
Arthur Poirier
Arthur Poirier
 and 
Thepthida Sopraseuth
Thepthida Sopraseuth
   | Nov 19, 2020
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Published Online: Nov 19, 2020
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DOI: https://doi.org/10.2478/izajodm-2020-0019
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© 2020 Julien Albertini, Arthur Poirier, Thepthida Sopraseuth, published by Sciendo
This work is licensed under the Creative Commons Attribution 4.0 International License.

Figure 1

Informality rate and unemployment rate in Argentina (in %).Source: EPH 2003Q3-2020Q1 Argentina and authors’ calculation. The share of informal work is defined as the number of workers employed in the informal sector divided by total employment. Shaded areas denote recession periods based on the Argentine Central Bank (BCRA) calculations.
Informality rate and unemployment rate in Argentina (in %).Source: EPH 2003Q3-2020Q1 Argentina and authors’ calculation. The share of informal work is defined as the number of workers employed in the informal sector divided by total employment. Shaded areas denote recession periods based on the Argentine Central Bank (BCRA) calculations.

Figure 2

Labor market stocks in Argentina, in% of the working-age population.Source: Argentine Household Survey, 2003Q3-2020Q1, and authors’ calculation. Stocks are expressed as a percentage of the working-age population. Notice that U refers here to unemployed workers as a% of the working-age population while Figure 1 displays the unemployment rate. Shaded areas denote recession periods based on the Argentine Central Bank (BCRA) calculations.
Labor market stocks in Argentina, in% of the working-age population.Source: Argentine Household Survey, 2003Q3-2020Q1, and authors’ calculation. Stocks are expressed as a percentage of the working-age population. Notice that U refers here to unemployed workers as a% of the working-age population while Figure 1 displays the unemployment rate. Shaded areas denote recession periods based on the Argentine Central Bank (BCRA) calculations.

Figure 3

Average worker flows, 2003Q3-2020Q1.Source: Argentine Household Survey, authors’ calculation. Worker transitions are expressed as the total number of people in thousands. For example, each quarter, out of the 1.6 million unemployed workers, 107,000 find a formal job, 377,000 find an informal job, and 541,000 leave the labor force.
Average worker flows, 2003Q3-2020Q1.Source: Argentine Household Survey, authors’ calculation. Worker transitions are expressed as the total number of people in thousands. For example, each quarter, out of the 1.6 million unemployed workers, 107,000 find a formal job, 377,000 find an informal job, and 541,000 leave the labor force.

Figure 4

Transition probabilities in%.“F,” “I,” “U,” and “N” indicate formal employment, informal employment, unemployment, and nonparticipation, respectively. For example, “ F→I ”: the transition from formal to informal work. Shaded areas denote recession periods based on the Argentine Central Bank (BCRA) calculations.
Transition probabilities in%.“F,” “I,” “U,” and “N” indicate formal employment, informal employment, unemployment, and nonparticipation, respectively. For example, “ F→I ”: the transition from formal to informal work. Shaded areas denote recession periods based on the Argentine Central Bank (BCRA) calculations.

Figure 5

Stocks: Male versus female.Source: Argentine Household Survey. Panels A, B, C, and D: stocks as% of the working-age population. Shaded areas denote recession periods based on the Argentine Central Bank (BCRA) calculations.
Stocks: Male versus female.Source: Argentine Household Survey. Panels A, B, C, and D: stocks as% of the working-age population. Shaded areas denote recession periods based on the Argentine Central Bank (BCRA) calculations.

Figure 6

Transition probabilities - Male versus Female in%.Source: Argentine Household Survey. The solid black lines are the transitions for men and the dashed blue are those for women. “F,” “I,” “U,” and “N” indicate formal employment, informal employment, unemployment, and nonparticipation, respectively. For example, “F→I”: the transition from formal to informal work. Shaded areas denote recession periods based on the Argentine Central Bank (BCRA) calculations.
Transition probabilities - Male versus Female in%.Source: Argentine Household Survey. The solid black lines are the transitions for men and the dashed blue are those for women. “F,” “I,” “U,” and “N” indicate formal employment, informal employment, unemployment, and nonparticipation, respectively. For example, “F→I”: the transition from formal to informal work. Shaded areas denote recession periods based on the Argentine Central Bank (BCRA) calculations.

Average quarterly transition probabilities (in%)

State t + 1FIUN
Statet
F2*91.492*4.722*1.312*2.48
I2*10.162*69.162*6.42

Each quarter, 6.42% of informal workers lose their jobs.

2*14.26
U2*6.742*23.69

Each quarter, 23.69% of unemployed workers find a job in the informal sector.

2*35.532*34.04
N2*1.822*7.742*5.342*85.10

Variance decomposition by gender based on β

Unemployment rateInformality rate
MenWomenMenWomen
(1)(2)(3)(4)
FI3.481.8314.8818.49
FU8.44−2.0612.412.34
FN3.484.7610.4210.60
IF0.242.9943.20

Changes in IF account for 43.20% of fluctuations in share of informal work in total male employment.

46.40
IU24.1824.69

Changes in IU account for 24.69% of fluctuations in the female unemployment rate.

−16.48−11.43
IN0.25−3.8213.523.37
UF5.888.5712.424.77
UI16.6811.664.22−0.71
UN19.077.160.77−0.79
NF0.59−0.371.176.34
NI1.13−2.44−0.3219.16
NU16.5747.033.781.47
IU and UI40.8636.3516.644.06
NU and UN35.6554.194.550.68
FI and IF3.724.8358.0964.89

Variance Decomposition based on b in%. 2003Q3-2020Q1

UnemploymentInformality
(1)(2)
FI3.0820.28
FU0.56−0.86
FN5.6616.92
IF2.5844.27

Changes in IF account for 44.27% of fluctuations in share of informal work in total employment.

IU25.38−12.75
IN−1.004.68
UF5.588.11
UI13.99

Changes in UI account for 13.99% of fluctuations in the unemployment rate.

−1.18
UN17.080.95
NF−1.012.32
NI−1.3314.27
NU29.432.99
IU and UI39.37−0.23
NU and UN46.513.94
FI and IF5.6764.55

Socio-demographic characteristics of employment

FormalInformal
Gender
Male57.48

A total of 57.48% of workers in formal employment are male.

50.49
Female42.5249.51
Age
to 24 years8.2426.71
to 54 years79.5864.54
to 64 years12.188.75
Education
Primary school and less14.3430.07

A total of 30.07% of workers in informal employment are low-educated (educational attainment in primary school and less).

Marital status
Married or common-law couples65.2347.15
Widowed, divorced, separated8.198.39
Single26.5844.46
Job
Weekly hours40.5035.64
Formality premium1.38

Formality premium: average hourly wage in formal job is 1.36 higher than in informal employment.

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