This paper conducts a cohort analysis of labor participation in urban Mexico in recent
decades. The rates analyzed are the labor force participation, the unemployment rate, and
the employment shares of the formal and informal salaried sectors, as well as of selfemployment.
These rates are decomposed into age, cohort, and time effects. The life cycle
patterns of labor force participation and formal employment follow a standard inverted Ushape.
Younger workers are more likely to participate in the informal salaried sector, while
self-employment increases monotonically with age. However, significant informal salaried
employment is also observed among older unskilled workers and women of different ages.
Strong countercyclical variations are observed for the informal salaried sector, while the
opposite occurs for the formal sector. Self-employment fluctuations are for the most part
acyclical. These facts support a mixed view of the labor markets whereby some informal
sector workers are rationed out of the formal sector, while others go into this sector
voluntarily. The analysis also indicates that the female labor force is countercyclical,
suggesting the existence of an “added worker" effect. Long-run generational effects show a
steadily rising participation in the informal sector with a corresponding decline in formality
among newer generations of salaried workers. Some preliminary explanations for this fact
are discussed.