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Equilibrium unemployment in the presence of different skill levels in two different regions: Mexico versus Egypt

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  • Imelda Flores Vazquez

Abstract

Unemployment rates increase with the level of education of the group surveyed in several developing countries. The goal of this paper is to provide a theoretical framework to study the determinants of this phenomenon. The model I present uses unemployment as a punishment device to force workers to perform well at work. The crucial assumption is that more educated workers can perform tasks that do not require much education and they chose to do so in the absence of unemployment insurance. This makes the threat of unemployment less harsh for educated workers and forces employers to decrease demand of educated employees in order to increase the punishment for them. I argue that this is a reasonable assumption to make in the case of two specific cases: Mexico and Egypt. Copyright Springer-Verlag Berlin Heidelberg 2014

Suggested Citation

  • Imelda Flores Vazquez, 2014. "Equilibrium unemployment in the presence of different skill levels in two different regions: Mexico versus Egypt," Letters in Spatial and Resource Sciences, Springer, vol. 7(3), pages 121-131, October.
    • Handle: RePEc:spr:lsprsc:v:7:y:2014:i:3:p:121-131
    DOI: 10.1007/s12076-013-0105-8
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    More about this item

    Keywords

    Youth unemployment; Education and unemployment; Underemployment; Mexico; Egypt; J21; J24; J46; I20;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • I20 - Health, Education, and Welfare - - Education - - - General

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