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Self – Employment, Labor Market Rigidities and Unemployment Over the Business Cycle

Gonzalo Castex and Miguel Ricaurte

Working Papers Central Bank of Chile from Central Bank of Chile

Abstract: In a general equilibrium context, we analyze the impact of changes in institutional labor market conditions, such as access to financing and efficiency, on the composition of employment and unemployment, considering the nature of formal labor contracts and the entrepreneurial capacity of the labor force. We extend the Mortensen - Pissarides model to allow for two types of formal job contracts: temporary and permanent; and we also allow for self-employment. We show that labor market efficiency as well as access to selfemployment financing played a key role in the evolution of employment in Chile during the last 15 years. Additionally, and not surprisingly, tougher access to financing adversely affects self-employment

Date: 2011-12
New Economics Papers: this item is included in nep-dge, nep-ent, nep-iue, nep-lab and nep-mac
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