The Effects of Labour Market Policies in an Economy with an Informal Sector

James Albrecht, Lucas Navarro and Susan Vroman

ILADES-UAH Working Papers from Universidad Alberto Hurtado/School of Economics and Business

Abstract: In this paper, we build an equilibrium search and matching model of an economy with an informal sector. Our model extends Mortensen and Pissarides (1994) by allowing for ex ante worker heterogeneity with respect to formal-sector productivity. We use the model to analyze the effects of labour market policy on informal-sector and formal sector output, on the division of the workforce into unemployment, informal-sector employment and formal-sector employment, and on wages. Finally, we examine the distributional implications of labour market policy; specifically, we analyse how labour market policy affects the distributions of wages and productivities across formal-sector matches. Keywords: Informality and Labour Market Policy

JEL-codes: E26 J64 O17 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2008-09
New Economics Papers: this item is included in nep-dev, nep-dge, nep-lab, nep-ltv and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: The Effects of Labour Market Policies in an Economy with an Informal Sector (2009)
Journal Article: The Effects of Labour Market Policies in an Economy with an Informal Sector (2009)
Working Paper: The Effects of Labor Market Policies in an Economy with an Informal Sector (2006)
Working Paper: The Effects of Labor Market Policies in an Economy with an Informal Sector (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ila:ilades:inv208

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