1. Informality and Globalization
W.F. Maloney
Office of the Chief Economist
Latin America and Caribbean
World Bank
LACML/OAS May 2004 Washington, DC

2. Sources:
From Natural Resources to the Knowledge Economy: Trade and Job Quality
Informality Revisted (World Development forthcoming)

3. What does a high rate of informality mean?
Self-Employment vs Level of Development
% Self Employed in Work Force
Log. Industrial Value Added/Worker

4. Rise in informality in early 1990s- booms and welfare improvement?
Mexico
Self Employed  Formal
Formal  Self Employed
66% voluntary
Unemployment
Bosch y Maloney 2004

5. Mex: rise in informality not acccompanied by segemenatation
No Secular Trend
Income Formal/SE
NT Boom
#Form/#SE
Fiess, Fugazza, Maloney 2001

6. Colombia: increase in massive segmentation
Income Formal/SE
#Form/#SE

7. Colombia vs. Mexico: Nominal rigidities have compounded the impact of the crisis
Distribution of informal and formal salaries
Careful with minimum wages!

8. Argentina: Movement Toward Informality Predates Trade Reform
Informality Rate for Salaried Workers in
Greater Buenos Aires, -
15%
20%
25%
30%
35%
40%
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
Trade Liberalization
Gasparini 2000

9. Formality Is Higher in Tradeable Industries
Rate of Formality By Tercile of Exports-imports/worker
High Imports
High Exports
Montes and Maloney 2001

10. Informality as part of global manufacturing chain
Informality as part of global manufacturing chain? Didn’t increase with NAFTA
Share of micros with large business clients
Sector
1994
1996
1998
Manufacturing 30 16 22
Services 12 11 10
Commerce 9
large clients: 30% earnings premium
large suppliers: 11% premium
Problem: isolation of informal sector.
Sanchez, Joo and Zappala 2001