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

25 Pages Posted: 16 Jun 2009

See all articles by James Albrecht

James Albrecht

Georgetown University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Lucas Navarro

Universidad Alberto Hurtado

Susan Vroman

Georgetown University; IZA Institute of Labor Economics

Date Written: 0000

Abstract

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.

Suggested Citation

Albrecht, James W. and Navarro, Lucas and Vroman, Susan B., The Effects of Labour Market Policies in an Economy with an Informal Sector (0000). Economic Journal, Vol. 119, Issue 539, pp. 1105-1129, July 2009. Available at SSRN: https://ssrn.com/abstract=1418185 or http://dx.doi.org/10.1111/j.1468-0297.2009.02268.x

James W. Albrecht

Georgetown University - Department of Economics ( email )

Washington, DC 20057
United States
202-687-6105 (Phone)
202-687-6102 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Lucas Navarro

Universidad Alberto Hurtado ( email )

Casilla 14446
Correo 21
Chile

Susan B. Vroman

Georgetown University ( email )

Washington, DC 20057
United States
202-687-6024 (Phone)
202-687-6102 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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