Estimates of the effect of the drop in remittances on

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Unformatted text preview: ormal Employment (In percent) Whole Sample Mexico Brazil Recession Mexico Brazil Whole Sample Mexico Brazil Recession Mexico Brazil Unemployment Rate Outflows‐F Outflows‐I I‐Inflows Outflows‐S Error 0.82 0.69 0.20 0.22 0.02 0.11 ‐0.03 ‐0.03 ‐0.01 0.01 0.76 0.65 0.24 0.04 ‐0.01 0.26 0.09 0.00 Formal Employment Outflows‐I Outflows‐S Outflows‐U I‐flows ‐0.02 0.00 Error 0.69 1.22 0.08 ‐0.21 0.01 ‐0.16 0.19 0.18 0.04 ‐0.02 0.84 1.31 ‐0.05 ‐0.15 ‐0.01 ‐0.22 0.17 0.08 0.05 ‐0.02 Notes: The table presents the contribution of the cyclical component of each flow to cyclical volatility of the unemployment rate and the share of formal employment for Mexico and Brazil following Fujita and Ramey, 2007. We define recession as output below trend. O=Out of the Labor Force, U=Unemployment, E=Employment, S=Informal Self‐Employed, I=Informal Salaried, and F=Formal Sector, all as proportions of working age population. Data for Mexico (left panels) is drawn from the quarterly National Urban Labor Survey (ENEU) from 1987:Q1 to 2004:Q4. Data for Brazil (right panels) is drawn from the Monthly Employment Survey (PME), quarterly averaged from 1983:Q1 to 2001:Q2. Underlying these results are differing responses of flows among particular sectors to downturns. Figure 1 presents the raw and detrended job finding probabilities across time in Brazil and Mexico. The former are somewhat clearer, however Brazil experienced a steady rise in informality across the sample period and this evolution muddies somewhat the cyclical patterns. What is clear is that flows from unemployment into formal employment show the greatest volatility across the cycle, decreasing more than any other sector of employment during downturns. Figure 2 shows the analogous series for job separations. In this case, transitions from formality to unemployment vary far less than either flows from informal salaried work or informal self employment. In the simulations underlying table 1, the contribution of each possible flow to the evolution of unemployment and formal employment is undertaken by modeling how all flows interact to generate these aggregates, and then sequentially holding one flow or another fixed and measuring the resulting impact on the evolution of the aggregate. 118 .4 .1 0 .2 .1 .3 .2 .4 .3 .5 .6 Figure 1: Job Finding Rates from Unemployment (Levels and Cycle): Mexico and Brazil Mexico Brazil 1983q1 1987q1 1991q3 1996q1 U-S U-F 2000q3 1988q1 1993q1 1998q1 2003q1 2005q1 U-I U-S U-F U-I -.4 -.4 -.2 -.2 0 0 .2 .2 .4 1987q1 1983q1 1991q3 1996q1 U-S (HP) U-F (HP) 2000q3 1988q1 1993q1 1998q1 2003q1 2005q1 U-I (HP) U-S (HP) U-F (HP) U-I (HP) 119 0 0 .02 .05 .04 .06 .1 .08 .1 .15 Figure 2: Job separation Rates towards Unemployment (Levels and Cycle): Mexico and Brazil Brazil Mexico 1983q1 1987q1 1991q3 1996q1 S-U F-U 2000q3 1988q1 1993q1 1998q1 2003q1 2005q1 I-U S-U F-U I-U -.4 -.4 -.2 -.2 0 0 .2 .2 .4 .4 1987q1 1983q1 1991q3 1996q1 S-U (HP) F-U (HP) 2000q3 1988q1 1993q1 1998q1 2003q1 2005q1 I-U (HP) S-U (HP) F-U (HP) I-U (HP) Notes: Figure 1 shows the transition rates from unemployment (U=Unemployment) into the three employment sectors (S=Informal Self‐employed, I=Informal Salaried, and F=Formal Sector). Figure 2 shows the transitions rates into unemployment (U) from all three sectors of employment. Transition rates are inferred from the continuous...
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