EconPapers    
Economics at your fingertips  
 

Unemployment and Development

Ying Feng, David Lagakos and James Rauch ()

No 7311, CESifo Working Paper Series from CESifo Group Munich

Abstract: This paper draws on household survey data from countries of all income levels to measure how average unemployment rates vary with income per capita. We document that unemployment is increasing with GDP per capita. Furthermore, we show that this fact is accounted for almost entirely by low-educated workers, whose unemployment rates are strongly increasing in GDP per capita, rather than by high-educated workers, whose unemployment rates are not correlated with income. To interpret these facts, we build a model with workers of heterogeneous ability and two sectors: a traditional sector, in which self-employed workers produce output without reward for ability; and a modern sector, in which firms hire in frictional labor markets, and output increases with ability. Countries differ exogenously in the productivity level of the modern sector. The model predicts that as productivity rises, the traditional sector shrinks, as progressively less-able workers enter the modern sector, leading to a rise in overall unemployment and in the ratio of low-educated to high-educated unemployment rates. Quantitatively, the model accounts for around one third of the cross-country patterns we document.

Keywords: unemployment; development (search for similar items in EconPapers)
JEL-codes: E24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.cesifo-group.de/DocDL/cesifo1_wp7311.pdf (application/pdf)

Related works:
Working Paper: Unemployment and Development (2018) Downloads
Working Paper: Unemployment and Development (2018) Downloads
Working Paper: Unemployment and Development (2018) Downloads
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:ces:ceswps:_7311

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Group Munich Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().

 
Page updated 2020-01-14
Handle: RePEc:ces:ceswps:_7311