Informal economy and spatial mobility: are informal workers economic refugees?

Abstract

Purpose – The paper aims to focus the attention on a particular segment of the labor market – informal workers. Despite a large literature on migration, interesting and relevant questions remain to be studied. The paper investigates whether informal workers could be compared to political refugees in terms of their performance in the source and in the destination economies. The paper estimates the effects of wage differentials, education and other personal and labor market controls on the probability of migration. Design/methodology/approach – The paper studies empirically the probability of migration of workers engaged in informal activities in Brazil using a binary choice model (probit) with particular attention to the self-selection problem of migrants. The paper uses data from the Informal Urban Economy Survey (IBGE). Findings – The results show that the probability of migration of informal workers is negatively related to a worker's education level. The paper finds that the probability of migration is increasing in the ability bias and in wage differentials. The results bring new evidence regarding the possibility of negative selection of migrants considering their observable characteristics, while it corroborates a positive selection of ability or unobservable characteristics of informal worker migrants. The paper presents evidence that less-educated workers are more likely to migrate and show that informal workers migrants behave as economic refugees. Originality/value – To the best of the authors' knowledge, this is the first paper to study the migration of workers engaged in informal activities.