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

Eliane Badaoui, Olivier Bargain (), Prudence Kwenda, Eric Strobl and Frank Walsh
Additional contact information
Eliane Badaoui: UPN - Université Paris Nanterre
Olivier Bargain: BSE - Bordeaux sciences économiques - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Prudence Kwenda: WITS - University of the Witwatersrand [Johannesburg]
Eric Strobl: UNIBE - Universität Bern = University of Bern = Université de Berne
Frank Walsh: UCD - University College Dublin [Dublin]

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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.

Keywords: Capital cost; Informal sector; Managerial ability; Self-employment (search for similar items in EconPapers)
Date: 2023-11-28
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Published in Journal of International Development, 2023, 36 (2), pp.1293-1323. ⟨10.1002/jid.3847⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05459057

DOI: 10.1002/jid.3847

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