Informality, Labor Market Dynamics, and Business Cycles in North Africa

September 8, 2023

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Format: Chicago

Olivier Bizimana, and Shant Arzoumanian. Informality, Labor Market Dynamics, and Business Cycles in North Africa, (USA: International Monetary Fund, 2023) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Employment informality is widespread across North Africa. This paper aims to shed light on the role played by the informal sector in labor market adjustments over the business cycle. It finds that the response of labor markets to output fluctuations is more muted in countries with higher informality levels, like the North African economies. The analysis also confirms that informal employment is countercyclical and acts as a buffer during economic downturns in countries with relatively higher informality. However, contrary to what took place in past recessions, informal employment contracted sharply during the 2020 pandemic recession in high informality economies, suggesting that it did not play its traditional countercyclical role. By contrast, employment informality tends to fall modestly or increase during economic upturns, including the post-pandemic recovery. This finding presages the persistence of a large informal sector in the post-covid era in medium- and high-informality countries.

Subject: Economic growth, Economic recession, Employment, Informal employment, Labor, Labor force participation, Labor markets

Keywords: Business cycles, Business cycles in North Africa, Economic recession, Employment, Employment informality, Informal employment, Informality, Informality economy, Labor force participation, Labor market dynamics, Labor Markets, Law coefficients from panel regression, North Africa, Okun’s Law, Product market rigidity

Publication Details

Pages:

36
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2023/182
Stock No:

WPIEA2023182
ISBN:

9798400250583
ISSN:

1018-5941

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