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Self-employment, wage employment, and informality in a developing economy

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  • John Bennett
  • Matthew D. Rablen

Abstract

We construct a simple model incorporating various urban labour market phenomena obtaining in developing economies, and we give a diagrammatic formulation of the market equilibrium. Our initial formulation assumes an integrated labour market and allows for entrepreneurship, self-employment, and wage employment. We then introduce labour market segmentation. In equilibrium voluntary and involuntary self-employment, formal and informal wage employment, and formal and informal entrepreneurship may all coexist. We illustrate the model by an example calibrated on Latin American data, examining individual labour market transitions and implications of education/training and labour market policies.

Suggested Citation

  • John Bennett & Matthew D. Rablen, 2015. "Self-employment, wage employment, and informality in a developing economy," Oxford Economic Papers, Oxford University Press, vol. 67(2), pages 227-244.
    • Handle: RePEc:oup:oxecpp:v:67:y:2015:i:2:p:227-244.
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    File URL: http://hdl.handle.net/10.1093/oep/gpu047
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    Cited by:

    1. John Bennett & Matthew Gould & Matthew Rablen, 2012. "Risk attitudes and informal employment in a developing economy," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 1(1), pages 1-17, December.
    2. Abu Shonchoy & PN Junankar, 2014. "The informal labour market in India: transitory or permanent employment for migrants?," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-27, December.
    3. Xue, Jinjun & Gao, Wenshu & Guo, Lin, 2014. "Informal employment and its effect on the income distribution in urban China," China Economic Review, Elsevier, vol. 31(C), pages 84-93.
    4. Eunice Maria M. N. Dos Santos & João J. Ferreira, 2017. "Analyzing Informal Entrepreneurship: A Bibliometric Survey," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 22(04), pages 1-20, December.
    5. Iain W. Long & Vito Polito, 2017. "Job Search, Unemployment Protection and Informal Work in Advanced Economies," CESifo Working Paper Series 6763, CESifo.

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    More about this item

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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