Wages and Informality in Developing Countries

Costas Meghir, Renata Narita and Jean-Marc Robin

No 1874, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: It is often argued that informal labor markets in developing countries promote growth by reducing the impact of regulation. On the other hand informality may reduce the amount of social protection offered to workers. We extend the wage-posting framework of Burdett and Mortensen (1998) to allow heterogeneous firms to decide whether to locate in the formal or the informal sector, as well as set wages. Workers engage in both off the job and on the job search. We estimate the model using Brazilian micro data and evaluate the labor market and welfare effects of policies towards informality.

Keywords: Informality; Unemployment; Job search; Wage posting; Equilibrium wage distributions; On the job search; �Method of moments (search for similar items in EconPapers)
JEL-codes: J24 J3 J42 J6 O17 (search for similar items in EconPapers)
Pages: 66 pages
Date: 2012-09
New Economics Papers: this item is included in nep-cwa, nep-dev, nep-dge, nep-iue, nep-lab, nep-lam and nep-ltv
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Published in American Economic Review (April 2015): 105(4): 1509-1546

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Related works:
Journal Article: Wages and Informality in Developing Countries (2015)
Working Paper: Wages and Informality in Developing Countries (2015)
Working Paper: Wages and Informality in Developing Countries (2015)
Working Paper: Wages and informality in developing countries (2013)
Working Paper: Wages and informality in developing countries (2013)
Working Paper: Wages and Informality in Developing Countries (2013)
Working Paper: Wages and Informality in Developing Countries (2012)
Working Paper: Wages and Informality in Developing Countries (2012)
Working Paper: Wages and Informality in Developing Countries (2012)
Working Paper: Wages and informality in developing countries (2012)
Working Paper: Wages and Informality in Developing Countries (2012)
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