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How Does Trade Affect Formal and Informal Jobs?
JETRO
2024.02.21
How does trade affect formal and informal jobs in developing economies? We estimate the impact of exports on employment in the formal and informal sectors by exploiting the European Union (EU)’s reform in rules of origin for duty-free market access, which produced a large positive shock to Cambodia’s garment exports to the EU (Tanaka and Greaney 2024). We find that the export shock caused large employment growth in formal garment establishments but had little effect on employment in informal garment establishments. The positive effect is pronounced for incumbent establishments and female workers. Thus, trade promotes employment disproportionately in the formal sector.