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An Equilibrium Search Model of the Informal Sector

Author

Listed:
  • Eliane Badaoui

    (THEMA - Université de Cergy-Pontoise)

  • Eric Strobl

    (Ecole Polytechnique Paris)

  • Frank Walsh

    (University College Dublin)

Abstract

We use an equilibrium search framework to model a formal- informal sector labour market where the informal sector arises endogenously. In our model large firms will be in the formal sector and pay a wage premium, while small firms are characterised by low wages and tend to be in the informal sector. Using data from the South African labour force survey we illustrate that the data is consistent with these predictions.

Suggested Citation

  • Eliane Badaoui & Eric Strobl & Frank Walsh, 2006. "An Equilibrium Search Model of the Informal Sector," Working Papers 200629, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:wpaper:200629
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    File URL: http://www.ucd.ie/economics/research/papers/2006/WP06.29.pdf
    File Function: First version, 2006
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    Cited by:

    1. Nicoletta Batini & Young-Bae Kim & Paul Levine & Emanuela Lotti, 2009. "Informal Labour and Credit Markets: A Survey," School of Economics Discussion Papers 0609, School of Economics, University of Surrey.
    2. Gomez Ospina, Monica A., 2023. "Optimal monetary policy in developing countries: The role of informality," Journal of Economic Dynamics and Control, Elsevier, vol. 155(C).
    3. Eliane El Badaoui & Eric Strobl & Frank Walsh, 2008. "Is There an Informal Employment Wage Penalty? Evidence from South Africa," Economic Development and Cultural Change, University of Chicago Press, vol. 56(3), pages 683-710, April.

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