Self-Employment, Wage Employment and Informality in a Developing Economy

John Bennett () and Matthew Rablen

CEDI Discussion Paper Series from Centre for Economic Development and Institutions(CEDI), Brunel University

Abstract: We construct a simple model incorporating various urban labour market phenomena obtaining in developing economies. Our initial formulation assumes an integrated labour market and allows for entrepreneurship, self-employment and wage employment. We then introduce labour market segmentation. In equilibrium voluntary and involuntary self-employment, formal and informal wage employment, and formal and informal and informal entrepreneurship may all coexist. We illustrate the model by an example calibrated on Latin American data, examining individual labour market transitions and implications of education/training and labour market policies. To diminish informality, cutting the costs of formality is more effective than raising those of informality.

Pages: 37 pages
Date: 2012-03
New Economics Papers: this item is included in nep-dev, nep-ent, nep-iue and nep-lab
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Self-employment, wage employment, and informality in a developing economy (2015)
Working Paper: Self-Employment, Wage Employment and Informality in a Developing Economy (2012)
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