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An Equilibrium Search Model of the Informal Sector

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  • 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.

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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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Bibliographic Info

Paper provided by School Of Economics, University College Dublin in its series Working Papers with number 200629.

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Length: 35 pages
Date of creation: 17 Dec 2006
Date of revision:
Handle: RePEc:ucn:wpaper:200629

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Cited by:
  1. El Badaoui, Eliane & Strobl, Eric & Walsh, Frank, 2007. "Is There an Informal Employment Wage Penalty? Evidence from South Africa," IZA Discussion Papers 3151, Institute for the Study of Labor (IZA).
  2. Batini, Nicoletta & Kim, Young-Bae & Levine, Paul & Lotti, Emanuela, 2011. "Informal Labour and Credit Markets: A Survey," Working Papers 11/94, National Institute of Public Finance and Policy.

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