Search Frictions, Financial Frictions, and Labor Market Fluctuations in Emerging Markets

Altuğ, Sumru; Kabaca, Serdar

doi:10.1080/1540496x.2016.1153466

Cited by 13 publications

(6 citation statements)

References 32 publications

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“…The representative household solves the following problem: where C t is consumption, h t is hours worked, D t+1 is foreign debt carried into the next period, R t is the gross interest rate on debt and Ξ t is lump-sum taxes that finance government spending. 2 Households earn 1 Another paper that employs the working capital channel to explain stylized labor market facts in emerging economies is Altug and Kabaca (2017).…”

Section: Householdsmentioning

confidence: 99%

Convergence stories of post‐socialist Central‐Eastern European countries

Baksa

Kónya

2021

The Manchester School

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Section: Householdsmentioning

confidence: 99%

Convergence stories of post‐socialist Central‐Eastern European countries

Baksa

Kónya

2021

The Manchester School

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“…3 In Latin America, for instance, recent estimates have found that, on average, one out of every two workers is employed in the informal labor market. 4 This observation raises both empirical and theoretical questions. On the empirical side, does informal employment exhibit any distinctive pattern across the business cycle of EMEs?…”

Section: Introductionmentioning

confidence: 99%

“…A comprehensive literature review is given in the Appendix. 4 See Powell (2013). This study reports that the (population-weighted) average of informality across Latin American countries is 44.1 percent.…”

Section: Introductionmentioning

confidence: 99%

Informal employment and business cycles in emerging economies: The case of Mexico

Fernández

Meza

2015

Review of Economic Dynamics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they represent. Terms of use: Documents inThe unauthorized commercial use of Bank documents is prohibited and may be punishable under the Bank's policies and/or applicable laws. Copyright ©Inter-American Development Bank. This working paper may be reproduced for any non-commercial purpose. It may also be reproduced in any academic journal indexed by the American Economic Association's EconLit, with previous consent by the Inter-American Development Bank (IDB), provided that the IDB is credited and that the author(s) receive no income from the publication. This paper documents how informal employment in Mexico is countercyclical, lags the cycle and is negatively correlated to formal employment. This contributes to explaining why total employment in Mexico displays low cyclicality and variability over the business cycle when compared to Canada, a developed economy with a much smaller share of informal employment. To account for these empirical findings, a business cycle model is built of a small, open economy that incorporates formal and informal labor markets, and the model is calibrated to Mexico. The model performs well in terms of matching conditional and unconditional moments in the data. It also sheds light on the channels through which informal economic activity may affect business cycles. Introducing informal employment into a standard model amplifies the effects of productivity shocks. This is linked to productivity shocks being imperfectly propagated from the formal to the informal sector. It also shows how imperfect measurement of informal economic activity in national accounts can translate into stronger variability in aggregate economic activity. Cataloging-in-Publication JEL classifications: F41, F44

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“…The government satis…es its budget constraint each period. 4. Markets clear for capital, labor and goods in the formal and informal sectors.…”

Section: Competitive Equilibriummentioning

confidence: 99%

Informal Employment and Business Cycles in Emerging Economies: The Case of Mexico

Fernández Martín

2015

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This paper documents how informal employment in Mexico is countercyclical, lags the cycle and is negatively correlated to formal employment. This contributes to explaining why total employment in Mexico displays low cyclicality and variability over the business cycle when compared to Canada, a developed economy with a much smaller share of informal employment. To account for these empirical findings, a business cycle model is built of a small, open economy that incorporates formal and informal labor markets, and the model is calibrated to Mexico. The model performs well in terms of matching conditional and unconditional moments in the data. It also sheds light on the channels through which informal economic activity may affect business cycles. Introducing informal employment into a standard model amplifies the effects of productivity shocks. This is linked to productivity shocks being imperfectly propagated from the formal to the informal sector. It also shows how imperfect measurement of informal economic activity in national accounts can translate into stronger variability in aggregate economic activity.

show abstract

Search Frictions, Financial Frictions, and Labor Market Fluctuations in Emerging Markets

Cited by 13 publications

References 32 publications

Convergence stories of post‐socialist Central‐Eastern European countries

Convergence stories of post‐socialist Central‐Eastern European countries

Informal employment and business cycles in emerging economies: The case of Mexico

Informal Employment and Business Cycles in Emerging Economies: The Case of Mexico

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