RT Journal Article
SR Electronic
T1 Is Informality Good for Business?
JF Journal of Human Resources
JO J Hum Resour
FD University of Wisconsin Press
SP 1141
OP 1186
DO 10.3368/jhr.56.4.1018-9794R2
VO 56
IS 4
A1 Rozo, Sandra V.
A1 Winkler, Hernan
YR 2021
UL http://jhr.uwpress.org/content/56/4/1141.abstract
AB We examine the effects of large inflows of internally displaced persons (IDP), who are primarily absorbed by the informal sector, on the behavior of formal manufacturing firms in Colombia. To identify causal effects, we employ annual firm-level panel data between 1995 and 2010 and exploit the fact that, when conflict intensifies, forcefully displaced individuals tend to migrate to municipalities where people from their origin locations settled earlier. We find that large inflows of IDP induce sizable negative effects on the intensive and extensive margins of production of formal firms. These effects are stronger for firms operating in sectors that face a stronger competition from the informal economy.