Informalization dynamics and gains : why want a job contract ?

Abstract EN

This paper examines the dynamics of informality and the extent to which informal workers (without job contracts) transit to formal employment (with job contracts) and whether this transition has changed over time and in particular during the recent political and economic turmoil in Egypt.

It also investigates the potential gains/losses associated with holding a job contract.

Using panel data from Egypt, we find that after the Arab Spring Revolution, the probability to work without a contract increased, and conditional on being informally employed, the probability to switch from private informal to private formal employment decreased.

We also find that working without contract is associated with pay penalty.

This pay penalty has increased significantly over time.

Furthermore, using Difference in difference techniques, the results show that moving from employment without contract to one with contract is associated with a substantial wage premium.