Unemployment Insurance, Job Search and Informal Employment

David Margolis, Lucas Navarro and David Robalino

No 6660, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper analyses the potential impacts of introducing unemployment insurance (UI) in middle income countries using the case of Malaysia, which today does not have such a system. The analysis is based on a job search model with unemployment and three employment sectors: formal and informal wage employment, and self employment. The parameters of the model are estimated to replicate the structure of the labor market in Malaysia in 2009 and the distribution of earnings for informal, formal and self employed workers. The results suggest that unemployment insurance would have only a modest negative effect on unemployment if benefits are not overly generous. The main effect would be a reallocation of labor from wage into self employment while increasing average wages in the formal and informal sectors.

Keywords: unemployment insurance; informal sector; self employment; job search (search for similar items in EconPapers)
JEL-codes: J21 J23 J31 J62 J64 J65 O17 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2012-06
New Economics Papers: this item is included in nep-dev, nep-dge, nep-ias, nep-iue, nep-lab, nep-ltv and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Related works:
Working Paper: Unemployment Insurance, Job Search, and Informal Employment (2014)
Working Paper: Unemployment Insurance, Job Search, and Informal Employment (2014)
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