Labour market segmentation in Cameroonian manufacturing

The economic crisis in Cameroon has provided a test for distinct causes of labour market segmentation. Many firms that previously followed rigid legislation have ceased to do so, while a traditional informal sector has continued outside almost all regulation. We categorise workers as informal, formal, or regulated, by firm characteristics, and test for labour market segmentation between these sectors. Direct legislation is the most significant cause of segmentation. We find limited evidence that the costs of becoming formal create rationing in formal‐sector jobs. While addressing both sets of rigidities would have maximum impact on unemployment in Cameroon, reforming direct labour legislation is likely to have the most beneficial short‐term impact.