Firm Heterogeneity, Informal Wage and Good Governance
AbstractWe provide an analysis of enforcement policies applicable to formal sector in dual labor markets. Using a framework with heterogeneous firms, endogenous determination of informal wage and politically dictated enforcement strategies, we show that firms which operate both in the formal and informal sectors do very little to increase employment when faced with the opportunity of hiring workers in the informal labor market. Thus enforcement of labor laws and other regulations should not have aggregate employment effects, particularly when workers are productively homogeneous. For firms operating exclusively in the informal sector, the outcome is different. Taxing the more productive seems to be the optimal strategy.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Review of Development Economics.
Volume (Year): 16 (2012)
Issue (Month): 4 (November)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=1363-6669
Other versions of this item:
- Kar, Saibal & Marjit, Sugata, 2011. "Firm Heterogeneity, Informal Wage and Good Governance," IZA Discussion Papers 5978, Institute for the Study of Labor (IZA).
- Sugata Marjit & Saibal Kar, . "Firm Heterogeneity, Informal Wage and Good Governance," Discussion Papers 11/23, University of Nottingham, GEP.
- Marjit, Sugata, 2009. "Firm Heterogeneity, Informal Wage and Good Governance," MPRA Paper 19168, University Library of Munich, Germany.
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
- K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
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