Growth and Labour Markets in Developing Countries

54 Pages Posted: 6 Jun 2006

See all articles by Jonathan R.W. Temple

Jonathan R.W. Temple

Centre for Economic Policy Research (CEPR)

Mathan Satchi

University of Kent - Department of Economics

Date Written: February 2006

Abstract

In middle-income countries, the informal sector often accounts for a substantial fraction of urban employment. We develop a general equilibrium model with matching frictions in the urban labour market, the possibility of self-employment in the informal sector, and scope for rural-urban migration. We investigate the effects of different types of growth on wages and the informal sector, and the extent to which labour market institutions can influence aggregate productivity. We quantify these effects by calibrating the model to data for Mexico, a country with a sizeable informal sector and significant labour market rigidities.

Keywords: Informal sector, urban unemployment, dual economies, matching frictions

JEL Classification: J40, O10

Suggested Citation

Temple, Jonathan R.W. and Satchi, Mathan, Growth and Labour Markets in Developing Countries (February 2006). CEPR Discussion Paper No. 5515, Available at SSRN: https://ssrn.com/abstract=906800

Jonathan R.W. Temple (Contact Author)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Mathan Satchi

University of Kent - Department of Economics ( email )

Keynes College
Kent, CT2 7NP
United Kingdom

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