Job search and mobility in developing countries. Theory and policy implications

Yves Zenou

Journal of Development Economics, 2008, vol. 86, issue 2, 336-355

Abstract: A labor market model is developed in which the formal sector is characterized by search frictions whereas the informal sector is competitive. We show that there exists a unique steady-state equilibrium in this dual economy. We then consider different policies financed by a tax on firms' profits. We find that reducing the unemployment benefit or the firms' entry cost in the formal sector induces higher job creation and formal employment, reduces the size of the informal sector but has an ambiguous effect on wages. We also find that an employment/wage subsidy policy and a hiring subsidy policy have different implications. In particular, the former increases the size of the informal sector while the latter decreases it.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (124)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304-3878(07)00061-2
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:86:y:2008:i:2:p:336-355

Access Statistics for this article

Journal of Development Economics is currently edited by M. R. Rosenzweig

More articles in Journal of Development Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().