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Self – Employment, Labor Market Rigidities and Unemployment Over the Business Cycle

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  • Gonzalo Castex
  • Miguel Ricaurte

Abstract

In a general equilibrium context, we analyze the impact of changes in institutional labor market conditions, such as access to financing and efficiency, on the composition of employment and unemployment, considering the nature of formal labor contracts and the entrepreneurial capacity of the labor force. We extend the Mortensen - Pissarides model to allow for two types of formal job contracts: temporary and permanent; and we also allow for self-employment. We show that labor market efficiency as well as access to selfemployment financing played a key role in the evolution of employment in Chile during the last 15 years. Additionally, and not surprisingly, tougher access to financing adversely affects self-employment

Suggested Citation

  • Gonzalo Castex & Miguel Ricaurte, 2011. "Self – Employment, Labor Market Rigidities and Unemployment Over the Business Cycle," Working Papers Central Bank of Chile 650, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:650
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    File URL: https://www.bcentral.cl/documents/33528/133326/DTBC_650.pdf
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    References listed on IDEAS

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    6. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    7. Fonseca, Raquel & Lopez-Garcia, Paloma & Pissarides, Christopher A., 2001. "Entrepreneurship, start-up costs and employment," European Economic Review, Elsevier, vol. 45(4-6), pages 692-705, May.
    8. N/A, 2009. "On the Recession," Local Economy, London South Bank University, vol. 24(3), pages 253-253, May.
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    Cited by:

    1. David Coble & Sebastián Faúndez, 2016. "The labor wedge and business cycles in Chile," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 19(1), pages 38-56, April.
    2. Ana Luisa Pessoa de Araujo, 2017. "Wage Inequality and Job Stability," Opportunity and Inclusive Growth Institute Working Papers 5, Federal Reserve Bank of Minneapolis.
    3. Ana Luisa Pessoa Araujo, 2018. "Wage Inequality and Job Stability," 2018 Meeting Papers 117, Society for Economic Dynamics.

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