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Unemployment Insurance, Job Search, and Informal Employment

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  • 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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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

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

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  1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
  2. Holzmann, Robert & Pouget, Yann & Vodopivec, Milan & Weber, Michael, 2011. "Severance Pay Programs around the World: History, Rationale, Status, and Reforms," IZA Discussion Papers 5731, Institute for the Study of Labor (IZA).
  3. Robalino, David A. & Zylberstajn, Eduardo & Robalino, Juan David, 2011. "Incentive Effects of Risk Pooling, Redistributive and Savings Arrangements in Unemployment Benefit Systems: Evidence from a Job-Search Model for Brazil," IZA Discussion Papers 5476, Institute for the Study of Labor (IZA).
  4. Albrecht, James & Navarro, Lucas & Vroman, Susan, 2006. "The Effects of Labor Market Policies in an Economy with an Informal Sector," IZA Discussion Papers 2141, Institute for the Study of Labor (IZA).
  5. Holmlund, B., 1997. "Unemployment Insurance in Theory and Practice," Papers 1997-25, Uppsala - Working Paper Series.
  6. 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.
  7. Konstantinos Tatsiramos, 2009. "Geographic labour mobility and unemployment insurance in Europe," Journal of Population Economics, Springer, vol. 22(2), pages 267-283, April.
  8. Mariano Bosch & Julen Esteban-Pretel, 2009. "Cyclical Informality and Unemployment," CIRJE F-Series CIRJE-F-613, CIRJE, Faculty of Economics, University of Tokyo.
  9. Milan Vodopivec & Andreas W�rg�tter & Dhushyanth Raju, 2005. "Unemployment Benefit Systems in Central and Eastern Europe: A Review of the 1990s1," Comparative Economic Studies, Palgrave Macmillan, vol. 47(4), pages 615-651, December.
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Cited by:
  1. Gimpelson, Vladimir & Kapeliushnikov, Rostislav, 2014. "Between Light and Shadow: Informality in the Russian Labour Market," IZA Discussion Papers 8279, Institute for the Study of Labor (IZA).
  2. Charlot, Olivier & Malherbet, Franck & Ulus, Mustafa, 2013. "Unemployment Compensation and the Allocation of Labor in Developing Countries," GIAM Working Papers 13-3, Galatasaray University Economic Research Center.

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