The Effects of Labour Market Policies in an Economy with an Informal Sector

Bibliographic Data

ID9720449
AuthorsJames Albrecht (0000-0003-1863-1284, Georgetown University and IZA), Lucas Navarro (0000-0003-1315-8301, ILADES‐Universidad Alberto Hurtado), Susan Vroman (0000-0002-0351-9006, Georgetown University and IZA)
Year2009
Volume119
Issue539
Pages1105-1129
Publication date2009-07-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueThe Economic Journal (JOURNAL)
Journal identifiersISSN: 0013-0133 • E-ISSN: 1468-0297
PublisherOxford University Press (OUP) (PUBLISHER)
DOI10.1111/j.1468-0297.2009.02268.x
OpenAlexW2167115491
LanguageEN
Citations received30
References cited21

In this article, we build an equilibrium search and matching model of an economy with an informal sector. Our model extends Mortensen and Pissarides (1994) by allowing for "ex ante" worker heterogeneity with respect to formal-sector productivity. We use the model to analyse the effects of labour market policy on informal-sector and formal-sector output, on the division of the workforce into unemployment, informal-sector employment and formal-sector employment, and on wages. Finally, we examine the distributional implications of labour market policy; specifically, we analyse how labour market policy affects the distributions of wages and productivities across formal-sector matches. Copyright © The Author(s). Journal compilation © Royal Economic Society 2009

Economic growth · Economic sector · Economics · Economy · Informal sector · Labour economics · Macroeconomics · Market economy · Matching (statistics · Productivity · Unemployment · Workforce · Fiscal Policy and Economic Growth · Gender, Labor, and Family Dynamics · Taxation and Compliance Studies