Arbeitspapier

Progress and stagnation in the livelihood of informal workers in an emerging economy: Long-term evidence from Indonesia

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We use long-spanning individual longitudinal data to examine the long-term labour market outcomes of low-tier informal workers. We investigate their characteristics, calculate the extent of switching, and identify the characteristics of those who have switched. Finally, we estimate the earnings premium of switching. We find that individuals are negatively selected into low-tier informal work. Almost half of individuals who started out as a low-tier informal worker remained as low-tier informal workers through the next 8-19 years. The other half switched on average three times. Most switches take place from low-tier informal to low-tier formal sector work. High-tier jobs are relatively closed off to those who started their career as low-tier informal workers. We find that the earnings premium that low-tier informal workers could gain by switching is large and statistically significant. An effective policy, therefore, is to support low-tier informal workers to improve their livelihoods by becoming low-tier formal workers.

ISBN
978-92-9256-900-6
Language
Englisch

Bibliographic citation
Series: WIDER Working Paper ; No. 2020/143

Classification
Wirtschaft
Wage Level and Structure; Wage Differentials
Informal Labor Markets
Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
Subject
earnings premium
Indonesia
informal sector
long-term outcomes

Event
Geistige Schöpfung
(who)
Rizky, Mayang
Suryadarma, Daniel
Suryahadi, Asep
Event
Veröffentlichung
(who)
The United Nations University World Institute for Development Economics Research (UNU-WIDER)
(where)
Helsinki
(when)
2020

DOI
doi:10.35188/UNU-WIDER/2020/900-6
Handle
Last update
10.03.2025, 11:43 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Rizky, Mayang
  • Suryadarma, Daniel
  • Suryahadi, Asep
  • The United Nations University World Institute for Development Economics Research (UNU-WIDER)

Time of origin

  • 2020

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