• many countries reveal an increasing trend of informality (SF 2)
Those stylized facts on the size and trends across time seem to be confirmed by a specific
studies in India by the (NCEUS). The official estimates, that identify the informal economy
with the unorganized sector plus informal jobs in the organized sector, point to a growing
trend of the already dominant unorganized sector in India. Also, another interesting
stylized fact emerges:
• the informalization of the formal sector (SF 3)
With this definition, the Commission implies that there has been an increase in informal
job (i.e. without job/social security) within the formal/organized sector. A similar trend
is confirmed for Argentina and other Latin American countries in Perry et al. (2007) and
Bosch and Maloney (2006). Bosch’s modelling strategy described in section 4.3 explains
these stylized facts (i.e the stipulation of informal contracts within a formal firm) through
a stochastic job matching model.
An analysis of Mexican and Brazilian labour markets shows they have a relatively
low unemployment rate compared to OECD countries. Bosch and Maloney (2006, 2007),
looking at microeconometric evidence from gross worker flows in Brazil and Mexico claim
that as a result of downturns and policy reforms, informal employment has changed con-
siderably due to the following stylized facts:
• the job finding rate of formal jobs is highly procyclical (volatility puzzle), while the
job finding rate of informal jobs is more stable (SF 4)
• the job separation rate in informal jobs is more responsive to negative shocks even
though the separation rates for formal and informal jobs are both countercyclical
(SF 5)
In general, Bosch and Maloney (2006, 2007) find that the hiring behavior of formal firms
is the main driving force to affect the share of formal employment.
• During a recession, despite the large increase in the job separation rate for informal
jobs, the share of formal jobs decreases (SF 6)
Also, and related to this, the evidence from Mexico and Brazil shows that flows from
the informal to the formal sector are highly pro-cyclical while flows in the other direction