Formal and informal institutions in the labor market, with applications to the construction sector in Egypt

Urban labor markets that are characterized by the absence or ineffectiveness of regulation by legal and bureaucratic institutions can nonetheless be subject to powerful institutional forces based on customary norms, group cohesion, kinship, and social networks. Using insights derived from the New Institutional Economics, this argument is illustrated with three examples from the construction labor market in Egypt, where formal and informal institutions performing similar functions are contrasted. In each case the informal institution is found to be significantly more important in shaping labor market relations.