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Unemployment Insurance, Job Search, and Informal Employment

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Author Info

  • David Margolis

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, IZA - Forschungsinstitut zur Zukunft der Arbeit (Institute for the Study of Labor) - Bonn Universität - University of Bonn)

  • Lucas Navarro

    (ILADES - Universidad Alberto Hurtado)

  • David A. Robalino

    (Social Protection and Labor Sector, Human Development Department - The World Bank)

Abstract

This paper analyses the potential impacts of introducing unemployment insurance (UI) in middle income countries using the case of Malaysia, which today does not have such a system. The analysis is based on a job search model with unemployment and three employment sectors: formal and informal wage employment, and self employment. The parameters of the model are estimated to replicate the structure of the labor market in Malaysia in 2009 and the distribution of earnings for informal, formal and self employed workers. The results suggest that unemployment insurance would have only a modest negative effect on unemployment if benefits are not overly generous. The main effect would be a reallocation of labor from wage into self employment while increasing average wages in the formal and informal sectors.

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File URL: http://hal.archives-ouvertes.fr/docs/00/71/43/72/PDF/IZA_V5.pdf
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Bibliographic Info

Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number hal-00714372.

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Date of creation: Jul 2014
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Publication status: Published, Social Insurance, Informality, and Labor Markets How to Protect Workers While Creating Good Jobs, Oxford University Press (Ed.), 2014, à paraître
Handle: RePEc:hal:cesptp:hal-00714372

Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00714372
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Web page: http://hal.archives-ouvertes.fr/

Related research

Keywords: Unemployment insurance; Informal sector; Self employment; Job search;

This paper has been announced in the following NEP Reports:

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  1. Holmlund, Bertil, 1998. " Unemployment Insurance in Theory and Practice," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(1), pages 113-41, March.
  2. Tatsiramos, Konstantinos, 2004. "Geographic Labour Mobility and Unemployment Insurance in Europe," IZA Discussion Papers 1253, Institute for the Study of Labor (IZA).
  3. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
  4. van Ours, Jan C. & Vodopivec, Milan, 2008. "Does reducing unemployment insurance generosity reduce job match quality?," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 684-695, April.
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