| Labor Clauses in Preferential Trade Agreements: How Do They Affect Informality? |
Rihab Bellakhal, 1,2 Sonia Ben Kheder, 3,4 Houda Haffoudhi, 2,5 |
1,2University of Carthage, IHEC, Tunisia / L.R. MASE, ESSAI, University of Carthage, Tunisia
2,5L.R. MASE, ESSAI, University of Carthage, Tunisia / University of Carthage, FSEGN, Tunisia
3,4University of Jendouba, FSJEGJ, Tunisia / U.R. DEFI, ESSECT, University of Tunis, Tunisia |
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Corresponding Author:
Rihab Bellakhal ,Email: rihabellakhal@gmail.com |
| Copyright ©2025 The Journal of Economic Integration |
| ABSTRACT |
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We study the effect of the labor clauses (LCs) in preferential trade agreements (PTAs) on the informal economy. Using a sample comprising 112 countries for the period 2000-2017, we show that PTAs increase informality in low- and middle-income economies (LMIEs), regardless of whether LCs are included or not. This result is confirmed when accounting for the heterogeneity of parties to the agreement. Finally, PTAs with LCs whose implementation relies on deep cooperation mechanisms decrease informality in LMIEs when their partners are high-income economies. The policy implication is that LMIEs should foster the integration of LCs enforced through deep cooperation mechanisms.
JEL Classification
F13: Trade Policy; International Trade Organizations
F14: Empirical Studies of Trade
F16: Trade and Labor Market Interactions
E26: Informal Economy; Underground Economy
O17: Formal and Informal Sectors; Shadow Economy; Institutional Arrangements |
| Keywords:
Preferential Trade Agreements | Labor Clauses | Informal Economy
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