The NAIRU and informality in the Mexican labor market
DOI:
https://doi.org/10.24201/ee.v36i1.417Keywords:
unemployment, informality, business cycleAbstract
The non-accelerating inflation rate of unemployment (NAIRU) is not directly observable and the presence of informal workers imposes an additional challenge in its estimation. In this paper, we present an estimation of the traditional NAIRU for Mexico and an alternative measure that includes informality as an indicator of labor underutilization. We find that both measures of NAIRU and the associated labor market slack indicators follow similar patterns over time. However, the slack estimated with the indicator that includes informality seems to predict inflationary pressures more accurately when the unemployment gap is close to zero.
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