We analyze the joint impact of employment protection and informality on macroeconomic volatility and the propagation of shocks in emerging economies. For this, we propose a small open economy business cycle model with frictional labor markets, labor regulation, and an informal sector, modeled as self-employment. The model is calibrated to the Mexican economy, in particular to business cycle moments for employment and informality obtained from our own calculations with the ENOE survey for the period 2005-2016. We show that international interest rate shocks, which affect specifically job creation in the formal sector, are key to obtain a counter-cyclical informality rate. In our model both the economy without an informal sector and the economy with informality but a lower burden of labor regulation feature higher volatility in employment but smaller fluctuations in TFP and output.

We estimate that about 10.6 percent of jobs could be done from home in Mexico, using 468 4-digit SINCO occupations and employment data in 2019. This is roughly half the estimate reported by Dingel and Neiman (2020) using teleworking criteria devised for the U.S. labor market. Owing to the peculiarities of the Mexican labor market, we report results by type of contract (formal and informal), geographical area, and gender. We validate our teleworking measure by exploiting the cross-state variation of real GDP per worker, the share of services in employment, and internet and computer access within the household. We find that the gap in teleworking possibilities favorable to females has its root in the disparate occupation structures across gender. During the pandemic, the decline in the share of non-telework jobs in females has been thrice as much as that in males

Se documenta la evolución de los mercados laborales de cinco países latinoamericanos durante la pandemia del COVID-19, con énfasis en el empleo informal. Se muestra, para la mayoría de países, una caída en el empleo agregado, reflejada en una caída en la participación laboral y una disminución de la tasa de informalidad. Esto último no tiene precedentes ya que la informalidad solía amortiguar la caída del empleo agregado en recesiones anteriores. Usando un modelo de ciclos económicos con una detallada estructura del mercado laboral, se recuperan los choques que racionalizan la recesión pandémica, mostrando que choques en la oferta laboral y de productividad en el sector informal son esenciales para dar cuenta de la pérdida de empleo y producción y del descenso en la tasa de informalidad.

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We analyze the joint impact of employment protection and informality on macroeconomic volatility and the propagation of shocks in emerging economies. For this, we propose a small open economy business cycle model with frictional labor markets, labor regulation, and an informal sector, modeled as self-employment. The model is calibrated to the Mexican economy, in particular to business cycle moments for employment and informality obtained from our own calculations with the ENOE survey for the period 2005-2016. We show that international interest rate shocks, which affect specifically job creation in the formal sector, are key to obtain a counter-cyclical informality rate. In our model both the economy without an informal sector and the economy with informality but a lower burden of labor regulation feature higher volatility in employment but smaller fluctuations in TFP and output.