Informality, self‐employment and heterogeneous managerial ability: A model for developing countries

Eliane El Badaoui, Olivier Bargain, Prudence Kwenda, Eric Strobl and Frank Walsh

Journal of International Development, 2024, vol. 36, issue 2, 1293-1323

Abstract: The view of informal employment as a last resort in the labour market has recently been challenged by numerous studies documenting the existence of a high degree of heterogeneity within the formal and informal sectors. In particular, informal self‐employment/employment may be voluntary or forced. There is currently not much theoretical support for these observations. We develop a theoretical model of the labour market with both formal and informal firms and a distribution of managerial skills in the population. Consistent with existing empirical evidence, this setup reconciles the undesirable and productive forms of self‐employment that coexist in the economy.

Date: 2024
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https://doi.org/10.1002/jid.3847

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Working Paper: Informality, Self-employment, and Heterogeneous Managerial Ability: A Model for Developing Countries (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jintdv:v:36:y:2024:i:2:p:1293-1323

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