Labor%20Market%20Search%2C%20Informality%20and%20Schooling%20Investments

Working Papers

Labor Market Search, Informality and Schooling Investments


CODE: IDB-WP-863
AUTHOR(s): Bobba, Matteo , Flabbi, Luca , Levy Algazi, Santiago
PUBLISHED: January 2018
LANGUAGE: English
RELATED TOPICS: Poverty Reduction and Labor
DOWNLOAD FILE IN: English

Abstract:

This paper develops a search and matching model where rms and workers are allowed to form matches (jobs) that can be formal or informal. Workers optimally choose the level of schooling acquired before entering the labor market and whether to search for a job as unemployed or as self-employed. Firms optimally decide the formality status of the job and bargain with workers over wages. The resulting equilibrium size of the informal sector is an endogenous function of labor market parameters and institutions. The paper focuses on an increasingly important institution: a \dual" social protection system whereby contributory bene ts in the formal sector coexist with non-contributory bene ts in the informal sector. Preferences are estimated for the system|together with all the other structural parameters of the labor market|using labor force survey data from Mexico and the time-staggered entry across municipalities of a non-contributory social program. Policy experiments show that informality may be reduced by either increasing or decreasing the payroll tax rate in the formal sector. They also show that a universal social security bene t system would decrease informality, incentivize schooling, and increase productivity at a relative scal cost similar to that generated by the current system.

Related Research by JEL Codes:
(or click here to find research by JEL Codes)
  • Labor Earnings, Misallocation, and the Returns to Education in Mexico
    Working Papers
    IDB-WP-671 - February 2016

    Over the last two decades Mexico has had an open trade regime, experienced macroeconomic stability, and made substantial progress in education. However, average workers’ earnings have stagnated and earnings for workers with more schooling have declined, compressing the earnings distribution and lowering the returns to education. We hypothesize that these developments are explained by large an ... (View publication)

  • Learning Better: Public Policy for Skills Development
    Books
    IDB-BK-171 - August 2017

    Despite governments’ best efforts, many people in Latin America and the Caribbean don’t have the skills they need to thrive. This book looks at what policies work, and don’t work, so that governments can help people learn better and realize their potential throughout their lifetimes. (View publication)

  • Learning Better: Public Policy for Skills Development (Executive Summary)
    Brochures
    IDB-BR-184 - August 2012

    Despite governments’ best efforts, many people in Latin America and the Caribbean don’t have the skills they need to thrive. This book looks at what policies work, and don’t work, so that governments can help people learn better and realize their potential throughout their lifetimes. (View publication)

Hello, Welcome to the IDB!

Please join our mailing list by simply entering your email below.