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Unemployment Insurance, Job Search and Informal Employment

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  • Margolis, David N.

    ()
    (Paris School of Economics)

  • Navarro, Lucas

    ()
    (Universidad Alberto Hurtado)

  • Robalino, David A.

    ()
    (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 Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6660.

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Length: 35 pages
Date of creation: Jun 2012
Date of revision:
Handle: RePEc:iza:izadps:dp6660

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Keywords: unemployment insurance; informal sector; self employment; job search;

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  1. Mariano Bosch & Julen Esteban-Pretel, 2009. "Cyclical Informality and Unemployment," CIRJE F-Series CIRJE-F-613, CIRJE, Faculty of Economics, University of Tokyo.
  2. Holmlund, Bertil, 1997. "Unemployment Insurance in Theory and Practice," Working Paper Series 1997:25, Uppsala University, Department of Economics.
  3. James Albrecht & Lucas Navarro & Susan Vroman, 2008. "The Effects of Labour Market Policies in an Economy with an Informal Sector," ILADES-Georgetown University Working Papers inv208, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
  4. Konstantinos Tatsiramos, 2009. "Geographic labour mobility and unemployment insurance in Europe," Journal of Population Economics, Springer, vol. 22(2), pages 267-283, April.
  5. Holzmann, Robert & Pouget, Yann & Vodopivec, Milan & Weber, Michael, 2011. "Severance pay programs around the world : history, rationale, status, and reforms," Social Protection Discussion Papers 62726, The World Bank.
  6. 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).
  7. 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.
  8. 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.
  9. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
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Cited by:
  1. 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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