Flexible Labor Regulations and Informality in Egypt

Jackline Wahba, Ragui Assaad

    Research output: Contribution to journalArticle

    4 Citations (Scopus)

    Abstract

    Do more flexible labor market regulations reduce informal employment in formal firms? This paper examines the effects of changes in labor regulations on the incidence of formal employment. Using the case of Egypt, we study the effects of the introduction of more flexible labor regulations in 2003 on the probability that non-contractual workers will be granted a formal employment contract. To identify the effect of the law and control for potential confounding factors, we use a difference-in-difference estimator that measures the difference in the pre- and post-law probability of obtaining a formal contract across a treatment group of non-contractual workers initially employed in formal firms and a comparison group of non-contractual workers initially employed in informal firms. The latter serve as a useful comparison group since informal firms are unlikely to formalize as a result of the law, so that the only way their workers can become formal is to move to another firm. Our findings show that the passage of the new labor law did in fact increase the probability of transitioning to formal employment for non-contractual workers employed in formal firms by about 3–3.5 percentage points, or the equivalent of at least a fifth of informal workers in formal firms.

    Original languageEnglish (US)
    Pages (from-to)962-984
    Number of pages23
    JournalReview of Development Economics
    Volume21
    Issue number4
    DOIs
    StatePublished - Nov 1 2017

    Fingerprint

    Egypt
    labor
    firm
    regulation
    worker
    Law
    informal group
    employment contract
    labor law
    New Labour
    labor market
    incidence
    Group
    effect

    Cite this

    Flexible Labor Regulations and Informality in Egypt. / Wahba, Jackline; Assaad, Ragui.

    In: Review of Development Economics, Vol. 21, No. 4, 01.11.2017, p. 962-984.

    Research output: Contribution to journalArticle

    @article{f2199fd0e5bc402ba3286af2a0204859,
    title = "Flexible Labor Regulations and Informality in Egypt",
    abstract = "Do more flexible labor market regulations reduce informal employment in formal firms? This paper examines the effects of changes in labor regulations on the incidence of formal employment. Using the case of Egypt, we study the effects of the introduction of more flexible labor regulations in 2003 on the probability that non-contractual workers will be granted a formal employment contract. To identify the effect of the law and control for potential confounding factors, we use a difference-in-difference estimator that measures the difference in the pre- and post-law probability of obtaining a formal contract across a treatment group of non-contractual workers initially employed in formal firms and a comparison group of non-contractual workers initially employed in informal firms. The latter serve as a useful comparison group since informal firms are unlikely to formalize as a result of the law, so that the only way their workers can become formal is to move to another firm. Our findings show that the passage of the new labor law did in fact increase the probability of transitioning to formal employment for non-contractual workers employed in formal firms by about 3–3.5 percentage points, or the equivalent of at least a fifth of informal workers in formal firms.",
    author = "Jackline Wahba and Ragui Assaad",
    year = "2017",
    month = "11",
    day = "1",
    doi = "10.1111/rode.12288",
    language = "English (US)",
    volume = "21",
    pages = "962--984",
    journal = "Review of Development Economics",
    issn = "1363-6669",
    publisher = "Wiley-Blackwell",
    number = "4",

    }

    TY - JOUR

    T1 - Flexible Labor Regulations and Informality in Egypt

    AU - Wahba, Jackline

    AU - Assaad, Ragui

    PY - 2017/11/1

    Y1 - 2017/11/1

    N2 - Do more flexible labor market regulations reduce informal employment in formal firms? This paper examines the effects of changes in labor regulations on the incidence of formal employment. Using the case of Egypt, we study the effects of the introduction of more flexible labor regulations in 2003 on the probability that non-contractual workers will be granted a formal employment contract. To identify the effect of the law and control for potential confounding factors, we use a difference-in-difference estimator that measures the difference in the pre- and post-law probability of obtaining a formal contract across a treatment group of non-contractual workers initially employed in formal firms and a comparison group of non-contractual workers initially employed in informal firms. The latter serve as a useful comparison group since informal firms are unlikely to formalize as a result of the law, so that the only way their workers can become formal is to move to another firm. Our findings show that the passage of the new labor law did in fact increase the probability of transitioning to formal employment for non-contractual workers employed in formal firms by about 3–3.5 percentage points, or the equivalent of at least a fifth of informal workers in formal firms.

    AB - Do more flexible labor market regulations reduce informal employment in formal firms? This paper examines the effects of changes in labor regulations on the incidence of formal employment. Using the case of Egypt, we study the effects of the introduction of more flexible labor regulations in 2003 on the probability that non-contractual workers will be granted a formal employment contract. To identify the effect of the law and control for potential confounding factors, we use a difference-in-difference estimator that measures the difference in the pre- and post-law probability of obtaining a formal contract across a treatment group of non-contractual workers initially employed in formal firms and a comparison group of non-contractual workers initially employed in informal firms. The latter serve as a useful comparison group since informal firms are unlikely to formalize as a result of the law, so that the only way their workers can become formal is to move to another firm. Our findings show that the passage of the new labor law did in fact increase the probability of transitioning to formal employment for non-contractual workers employed in formal firms by about 3–3.5 percentage points, or the equivalent of at least a fifth of informal workers in formal firms.

    UR - http://www.scopus.com/inward/record.url?scp=84996593707&partnerID=8YFLogxK

    UR - http://www.scopus.com/inward/citedby.url?scp=84996593707&partnerID=8YFLogxK

    U2 - 10.1111/rode.12288

    DO - 10.1111/rode.12288

    M3 - Article

    VL - 21

    SP - 962

    EP - 984

    JO - Review of Development Economics

    JF - Review of Development Economics

    SN - 1363-6669

    IS - 4

    ER -