Mauritius: Unemployment and the Role of Institutions

James Yao and Calvin McDonald

No 2003/211, IMF Working Papers from International Monetary Fund

Abstract: Despite strong economic growth, a "U"-curve unemployment phenomenon in Mauritius can be observed. Unemployment plunged from 21 percent to less than 4 percent between the early 1980s and the early 1990s, but this trend was reversed and the rate increased to 10 percent by end-2002. This paper provides an analytical framework to explain this development. The growth of higher-skilled sectors coupled with rigidities in the labor market seem to account for the observed unemployment behavior. Policy makers can improve employment prospects by not only investing in education to reduce skills mismatch but also by reforming the pay-setting institutions.

Keywords: WP; labor market; unemployment rate; wage differential; Unemployment; institutions; wage; skill premium; production function; unskilled worker; skill-learning worker; labor demand gap; determination system; workers life; wage inequality; high-learning-cost worker; Mauritian unemployment puzzle; wage-bargaining system; unemployment problem; Wages; Labor market institutions; Labor force; Skilled labor; Europe (search for similar items in EconPapers)
Pages: 18
Date: 2003-11-01
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Citations: View citations in EconPapers (12)

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