The Effect of Exports on Labor Informality: Evidence from Argentina

This paper explores the causal impact of exports on the share of informal labor
in the Argentinean manufacturing sector. Using an instrumental variable approach to address potential endogeneity concerns, I show that an exogenous 10 percentage points increase in export intensity induces a reduction of the informality rate of 2.2 percentage points. Then, I explore the channel through which exports affect informality. By differentiating exports according to the income group of their destinations, I find that the aggregate effect of exports is explained by the sales to high-income countries. Moreover, the effect is partially explained by an increase in the complexity of the tasks performed in the jobs. Overall, the evidence suggests that under an increase in the demand of higher quality exports, the manufacturing firms increase their productivity by reducing their share of informal workers.