Mobility in the Urban Labor Market: A Panel Data Analysis for Mexico

Xiaodong Gong, Arthur H.O. van Soest, Elizabeth Villagomez
2000 Social Science Research Network  
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more » ... bedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This Discussion Paper is issued within the framework of IZA's research area Mobility and Flexibility of Labor Markets. Any opinions expressed here are those of the author(s) and not those of the institute. Research disseminated by IZA may include views on policy, but the institute itself takes no institutional policy positions. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent, nonprofit limited liability company (Gesellschaft mit beschränkter Haftung) supported by the Deutsche Post AG. The center is associated with the University of Bonn and offers a stimulating research environment through its research networks, research support, and visitors and doctoral programs. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. The current research program deals with (1) mobility and flexibility of labor markets, (2) internationalization of labor markets and European integration, (3) the welfare state and labor markets, (4) labor markets in transition, (5) the future of work, (6) project evaluation and (7) general labor economics. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. We analyze mobility in urban Mexico between three labor market states: working in the formal sector, working in the informal sector, and not working. We use a dynamic multinomial logit panel data model with random effects, explaining the labor market state of each individual during each time period. The data is drawn from Mexico 's Urban Employment Survey, a quarterly household survey for urban Mexico. Two separate five-wave panels are used: the first covering a period of rapid economic growth (1992 -1993), the second a period of recession after the Peso crisis (1994 -1995). Our main results are in line with the theory that formal sector jobs are superior to informal sector jobs and that working in the informal sector is a temporary state for those who cannot find a formal sector job and cannot afford not to work. Entry and exit rates for the formal sector are lower than for the informal sector. The probability of formal sector employment strongly increases with education level. For men, it is easier to enter the formal sector from the nonworking state than from the informal sector. The probability of working in the informal sector decreases with the level of income of other family members, while the probability of not working increases with it. JEL Classification: C23, C25, J60, R23
doi:10.2139/ssrn.247007 fatcat:duhmnuaxkrdllh6uvrq6kpctny