An equilibrium search model of the informal sector

Eliane El Badaoui, Eric Strobl () and Frank Walsh

No 200629, Working Papers from School of Economics, University College Dublin

Abstract: We use an equilibrium search framework to model a formal- informal sector labour market where the informal sector arises endogenously. In our model large firms will be in the formal sector and pay a wage premium, while small firms are characterised by low wages and tend to be in the informal sector. Using data from the South African labour force survey we illustrate that the data is consistent with these predictions.

Keywords: Informal sector (Economics)--Mathematical models; Labor market--Mathematical models; Labor market--South Africa (search for similar items in EconPapers)
Date: 2006-12
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Citations: View citations in EconPapers (4)

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