Bosch, MarianoMaloney, William2012-05-302012-05-302008-06https://hdl.handle.net/10986/6672This paper analyzes the cyclical properties of worker flows in Brazil and Mexico, two important developing countries with large unregulated or informal sectors. It generates three stylized facts that are critical to the accurate modeling of the sector and which suggest the need to rethink the approaches to date. First, the unemployment rate is countercyclical essentially because job separations of informal workers increase dramatically in recessions. Second, the share of formal employment is countercyclical because of the difficulty of finding formal jobs from inactivity, unemployment and other informal jobs during recessions rather than because of increased separation from formal jobs. Third, flows from formality into informality are not countercyclical, but, if anything, pro-cyclical. Together, these challenge the conventional wisdom that has guided the modeling the sector that informal workers are primarily those rationed out of the formal labor market. They also offer a new synthesis of the mechanics of the cyclical adjustment process. Finally, the paper offers estimates of the moments of worker flows series that are needed for calibration.CC BY 3.0 IGOACCOUNTINGADJUSTMENT PROCESSAGGREGATE PRODUCTIVITYATTRITIONBUSINESS CYCLEBUSINESS CYCLESBUSINESS SCHOOLCALCULATIONSCONTRIBUTIONCONTRIBUTIONSCRISESCULTURAL CHANGECURRENT JOBCYCLICAL UNEMPLOYMENTDEVELOPING COUNTRIESDEVELOPMENT ECONOMICSDISGUISED UNEMPLOYMENTDRIVERSEARNINGSECONOMIC DEVELOPMENTEMPLOYMENT COMPOSITIONEMPLOYMENT DYNAMICSEMPLOYMENT PROGRAMEMPLOYMENT SHAREEMPLOYMENT STATUSEMPLOYMENT STATUSESEQUILIBRIUM UNEMPLOYMENTESTIMATED PARAMETERSFEDERAL RESERVEFINANCIAL CRISISFIRM DYNAMICSFIRM SIZEFORMAL LABOR MARKETFORMAL SECTOR WORKERSHEALTH INSURANCEIMPORTANT POLICYINCOMEINFORMAL ECONOMYINFORMAL EMPLOYMENTINFORMAL LABOR MARKETSINFORMAL SECTORINTERNATIONAL LABOR ORGANIZATIONINTERNATIONAL LABOUR ORGANIZATIONJOB CREATIONJOB DESTRUCTIONJOB LOSSJOB SEARCHJOB SEPARATIONJOBSLABOR CODELABOR ECONOMICSLABOR FORCELABOR LAWSLABOR LEGISLATIONLABOR MARKET ADJUSTMENTLABOR MARKET INSTITUTIONSLABOR MARKET POLICIESLABOR MARKET TRANSITIONSLABOR MARKETSLABOR ORGANIZATIONLABOR REGULATIONSLABOR SURVEYSLABOURLABOUR FORCELABOUR MARKETLARGE FIRMSLATIN AMERICANMACRO ECONOMIC FLUCTUATIONSMACROECONOMIC FLUCTUATIONSMIGRATIONMINIMUM WAGEMINORITYNEW JOBPENSIONPOLICY IMPLICATIONSPOLICY RESEARCHPOLICY RESEARCH WORKING PAPERPOLITICAL ECONOMYPREVIOUS SECTIONPROBABILITIESPROBABILITYPRODUCTIVE EMPLOYMENTPROGRESSPUBLIC ECONOMICSQUESTIONNAIRERECESSIONRECESSIONARY PERIODRECESSIONARY PERIODSRECESSIONSRESEARCH ASSISTANCERESERVE BANKRESPECTSAFETYSAFETY NETSALARIED WORKERSSELF EMPLOYEDSELF EMPLOYMENTSELF-EMPLOYMENTSERVANTSSEXSOCIAL PROGRAMSSOCIAL SECURITYSOCIAL SECURITY CONTRIBUTIONSSTOCKSTOTAL EMPLOYMENTTOTAL UNEMPLOYMENTTRADE LIBERALIZATIONUNEMPLOYEDUNEMPLOYED WORKERSUNEMPLOYMENTUNEMPLOYMENT DURATIONUNEMPLOYMENT LEVELSUNEMPLOYMENT RATEUNEMPLOYMENT RATESUNPAID FAMILY WORKERSURBAN AREASURBAN EMPLOYMENTURBAN EMPLOYMENT SURVEYWAGE RIGIDITYWAGE SECTORWAGESWORK FORCEWORKERWORKERSWORKFORCEWORKING AGEWORKING AGE POPULATIONWorld Bank10.1596/1813-9450-4648