Labor Market Search, Informality, and On-the-Job Human Capital Accumulation

65 Pages Posted: 28 Jan 2019

See all articles by Matteo Bobba

Matteo Bobba

University of Toulouse 1 - Toulouse School of Economics (TSE)

Luca Flabbi

RES - Inter-American Development Bank; Georgetown University - Department of Economics; IZA Institute of Labor Economics

Santiago Levy

Inter-American Development Bank (IDB)

Mauricio Tejada

Universidad Alberto Hurtado

Abstract

We develop a search and matching model where firms and workers produce output that depends both on match-specific productivity and on worker-specific human capital. The human capital is accumulated while working but depreciates while searching for a job. Jobs can be formal or informal and firms post the formality status. The equilibrium is characterized by an endogenous steady state distribution of human capital and by an endogenous formality rate. The model is estimated on longitudinal labor market data for Mexico. Human capital accumulation on-the-job is responsible for more than half of the overall value of production and upgrades more quickly while working formally than informally. Policy experiments reveal that the dynamics of human capital accumulation magnifies the negative impact on productivity of the labor market institutions that give raise to informality.

Keywords: labor market frictions, search and matching, Nash bargaining, informality, on-the-job human capital accumulation

JEL Classification: J24, J3, J64, O17

Suggested Citation

Bobba, Matteo and Flabbi, Luca and Levy, Santiago and Tejada, Mauricio, Labor Market Search, Informality, and On-the-Job Human Capital Accumulation. IZA Discussion Paper No. 12091. Available at SSRN: https://ssrn.com/abstract=3323206

Matteo Bobba (Contact Author)

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

Luca Flabbi

RES - Inter-American Development Bank ( email )

1300 New York Ave., NW
Washington, DC 20577
United States

Georgetown University - Department of Economics ( email )

Washington, DC 20057
United States

HOME PAGE: http://www9.georgetown.edu/faculty/lf74/

IZA Institute of Labor Economics

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

Santiago Levy

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

Mauricio Tejada

Universidad Alberto Hurtado

Casilla 14446
Correo 21
Chile

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