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An evolutionary game theory approach to the dynamics of the labour market: A formal and informal perspective

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  • Araujo, Ricardo Azevedo
  • de Souza, Nathalia Almeida

Abstract

A stylized fact of the labour market in developing countries is that it is highly segmented in informality. One of the main factors that induce workers and firms into informality is an excessive regulatory system that makes formal economy little attractive. This study aims to analyze the dynamics of workers and firms' entrance and withdrawal of the formal and informal economy, assessing the impact of taxes by using an evolutionary game theory approach in which economic agents decide for one these markets according to the expected pay-off. Moreover, the optimal relation between regulatory and enforcement action by the government is evaluated.

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Bibliographic Info

Article provided by Elsevier in its journal Structural Change and Economic Dynamics.

Volume (Year): 21 (2010)
Issue (Month): 2 (May)
Pages: 101-110

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Handle: RePEc:eee:streco:v:21:y:2010:i:2:p:101-110

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Web page: http://www.elsevier.com/locate/inca/525148

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Keywords: Evolutionary game theory approach Labour market Informal economy;

References

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  9. G. Fagiolo & G. Dosi & R. Gabriele, 2004. "Matching, Bargaining, And Wage Setting In An Evolutionary Model Of Labor Market And Output Dynamics," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 7(02), pages 157-186.
  10. Loayza, Norman V. & Oviedo, Ana Maria & Serven, Luis, 2005. "The impact of regulation on growth and informality - cross-country evidence," Policy Research Working Paper Series 3623, The World Bank.
  11. Matteo Richiardi, 2006. "Toward a Non-Equilibrium Unemployment Theory," Computational Economics, Society for Computational Economics, vol. 27(1), pages 135-160, February.
  12. Maloney, William F., 2004. "Informality Revisited," World Development, Elsevier, vol. 32(7), pages 1159-1178, July.
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  15. Diamond, Peter A, 1982. "Aggregate Demand Management in Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 881-94, October.
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  17. Almeida, Rita & Carneiro, Pedro, 2005. "Enforcement of labor regulation, informal labor, and firm performance," Policy Research Working Paper Series 3756, The World Bank.
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Cited by:
  1. Araujo, Ricardo Azevedo & Loureiro, Paulo Roberto & Souza, Nathalia Almeida, 2011. "An Empirical Evaluation of an Evolutionary Game Theory Model of the Labor Market," MPRA Paper 30408, University Library of Munich, Germany.
  2. Araujo, Ricardo Azevedo & Moreira, Helmar Nunes, 2011. "Lyapunov stability in an evolutionary game theory model of the labor market," MPRA Paper 36932, University Library of Munich, Germany.

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