Employment Targeting in a Frictional Labor Market
Chetan Ghate () and
MPRA Paper from University Library of Munich, Germany
Governments in both developing and developed economies play an active role in labor markets in the form of providing both formal public sector jobs and employment through public workfare programs. We refer to this as employment targeting. In the context of a simple search and matching friction model, we show that the propensity for the public sector to target more employment can increase the unemployment rate in the economy and lead to an increase in the size of the informal sector. Employment targeting can therefore have perverse effects on labor market outcomes.
Keywords: Search and Matching Frictions; Labor Markets; Employment; Informal Sector; Public Sector. (search for similar items in EconPapers)
JEL-codes: D83 J46 O17 O20 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-iue and nep-lab
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:87065
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