Macroeconomic adjustment with segmented labor markets
AbstractThis paper analyzes the macroeconomic effects of fiscal and labor market policies in developing countries. The basic framework considers a small open economy with a large informal production sector and a heterogeneous work force. The labor market is segmented as a result of efficiency considerations and minimum wage laws. The basic model is then extended to account for unemployment benefits, income taxation, and imperfect labor mobility across sectors. The analysis indicates, among other results, that a reduction in unemployement benefits has a positive effect on output of tradable goods by lowering both the level of efficiency wages and the relative rent captured by skilled workers.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Development Economics.
Volume (Year): 58 (1999)
Issue (Month): 2 (April)
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Web page: http://www.elsevier.com/locate/devec
Other versions of this item:
- Joshua Aizenman & Pierre-Richard AgÃ©nor, 1994. "Macroeconomic Adjustment with Segmented Labor Markets," IMF Working Papers 94/56, International Monetary Fund.
- Pierre-Richard Agenor & Joshua Aizenman, 1994. "Macroeconomic Adjustment with Segmented Labor Markets," NBER Working Papers 4769, National Bureau of Economic Research, Inc.
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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