How Does the Ecuadorian Labor Market React to A Crisis?

Abstract

This paper studies the behavior of the Ecuadorian labor market in an economic crisis caused by an exogenous drop in crude oil prices. We consider a two-sector (formal and informal) and apply a difference-in-difference identification strategy. The findings reveal that social security affiliation reduces the probability of remaining employed by 3% during the crises, with disemployment effects disproportionately affecting women (10 times higher than those for men). These results underscore the structural challenges of labor market rigidities in developing economies and highlight the need for policies that mitigate gender-based disparities.