Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/58493 
Year of Publication: 
2012
Series/Report no.: 
IZA Discussion Papers No. 6406
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
We construct a simple model incorporating various urban labour market phenomena obtaining in developing economies. Our initial formulation assumes an integrated labour market and allows for entrepreneurship, self-employment and wage employment. We then introduce labour market segmentation. In equilibrium voluntary and involuntary self-employment, formal and informal wage employment, and formal and informal entrepreneurship may all coexist. We illustrate the model by an example calibrated on Latin American data, examining individual labour market transitions and implications of education/training and labour market policies. To diminish informality, cutting the costs of formality is more effective than raising those of informality.
Subjects: 
self-employment
wage employment
informality
JEL: 
O17
J23
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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