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The Sri Lankan Unemployment Problem Revisited

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  • MartÌn Rama

Abstract

High unemployment in Sri Lanka has been attributed to unrealistic expectations, to queuing for public sector jobs, and to stringent job security regulations. However, the empirical evidence supporting these explanations is weak. This paper analyzes individual records from the 1995 Labor Force Survey, and time series for wages in the formal and informal sectors of the economy. The paper rejects the unrealistic-expectations hypothesis by comparing the impact of education on the actual wages of those who have a job and on the lowest acceptable wages of the unemployed. But it finds substantial rents associated with jobs in the public sector, and in activities protected by high tariffs or covered by job security regulations. A time-series analysis of the impact of unemployment on wage increases across sectors suggests that many among the unemployed are waiting for "good" job openings, but are not interested in readily available "bad" jobs. Copyright Blackwell Publishing Ltd 2003.

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  • MartÌn Rama, 2003. "The Sri Lankan Unemployment Problem Revisited," Review of Development Economics, Wiley Blackwell, vol. 7(3), pages 510-525, August.
  • Handle: RePEc:bla:rdevec:v:7:y:2003:i:3:p:510-525
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    1. Terrell, Katherine, 1993. "Public-private wage differentials in Haiti Do public servants earn a rent?," Journal of Development Economics, Elsevier, vol. 42(2), pages 293-314, December.
    2. Taye Mengistae, 1998. "Wage rates and job queues: does the public sector overpay in Ethiopia?," CSAE Working Paper Series 1998-20, Centre for the Study of African Economies, University of Oxford.
    3. William T. Dickens & Kevin Lang, 1991. "An Analysis of the Nature of Unemployment in Sri Lanka," NBER Working Papers 3777, National Bureau of Economic Research, Inc.
    4. van der Gaag, Jacques & Vijverberg, Wim, 1988. "A Switching Regression Model for Wage Determinants in the Public and Private Sectors of a Developing Country," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 244-252, May.
    5. Rama, Martin, 1998. "How Bad Is Unemployment in Tunisia? Assessing Labor Market Efficiency in a Developing Country," World Bank Research Observer, World Bank Group, vol. 13(1), pages 59-77, February.
    6. Rama, Martin & DEC, 1994. "Flexibility in Sri Lanka's labor market," Policy Research Working Paper Series 1262, The World Bank.
    7. Assaad, Ragui, 1997. "The Effects of Public Sector Hiring and Compensation Policies on the Egyptian Labor Market," World Bank Economic Review, World Bank Group, vol. 11(1), pages 85-118, January.
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    Cited by:

    1. Ajwad, Mohamed Ihsan & Kurukulasuriya, Pradeep, 2002. "Ethnic and gender wagedisparities in Sri Lanka," Policy Research Working Paper Series 2859, The World Bank.
    2. Aysit TANSEL & H. Mehmet TASCI, "undated". "Determinants of Unemployment Duration for Men and Women in Turkey," Middle East and North Africa 330400055, EcoMod.
    3. Aysit Tansel & H. Mehmet Taşçı, 2010. "Hazard Analysis of Unemployment Duration by Gender in a Developing Country: The Case of Turkey," LABOUR, CEIS, vol. 24(4), pages 501-530, December.
    4. Pieter Serneels, 2002. "Explaining Non-Negative Duration Dependence Among the Unemployed," CSAE Working Paper Series 2002-13, Centre for the Study of African Economies, University of Oxford.
    5. Pieter Serneels, 2002. "The added worked effect and intra household aspects of unemployment," CSAE Working Paper Series 2002-14, Centre for the Study of African Economies, University of Oxford.
    6. World Bank, 2007. "Sri Lanka : Strengthening Social Protection," World Bank Other Operational Studies 19638, The World Bank.
    7. Pieter Serneels, 2004. "The Nature of Unemployment in Urban Ethiopia," CSAE Working Paper Series 2004-01, Centre for the Study of African Economies, University of Oxford.
    8. World Bank, 2007. "Sri Lanka - Poverty Assessment : Engendering Growth with Equity, Opportunities and Challenges," World Bank Other Operational Studies 8050, The World Bank.
    9. Martin Godfrey, 2003. "Youth employment policy in developing and transition countries - preventionas well as cure," Social Protection and Labor Policy and Technical Notes 27875, The World Bank.
    10. Kuchibhotla, Murali, 2013. "Three essays in development economics," ISU General Staff Papers 201301010800004461, Iowa State University, Department of Economics.
    11. Dileni Gunewardena & Darshi Abeyrathna & Amalie Ellagala & Kamani Rajakaruna & Shobana Rajendran, 2008. "Glass Ceilings, Sticky Floors or Sticky Doors? A Quantile Regression Approach to Exploring Gender Wage Gaps in Sri Lanka," Working Papers PMMA 2008-04, PEP-PMMA.
    12. Deininger, Klaus & Jin, Songqing & Sur, Mona, 2007. "Sri Lanka's Rural Non-Farm Economy: Removing Constraints to Pro-Poor Growth," World Development, Elsevier, vol. 35(12), pages 2056-2078, December.
    13. Karunagoda, Kamal, 2004. "Changes in Labour Market and Domestic Agriculture," Sri Lankan Journal of Agricultural Economics, Sri Lanka Agricultural Economics Association (SAEA), vol. 6.
    14. Gunewardena, Dileni, 2004. "Improving poverty measurement in Sri Lanka," MPRA Paper 7695, University Library of Munich, Germany, revised May 2005.
    15. Giulia Lamattina, 2008. "Conflict Migration and Social Networks: Empirical Evidence from Sri Lanka," Rivista di Politica Economica, SIPI Spa, vol. 98(6), pages 161-194, November-.
    16. McCormick, Barry & Wahba, Jackline, 2003. "Did public wage premiums fuel agglomeration in LDCs?," Journal of Development Economics, Elsevier, vol. 70(2), pages 349-379, April.
    17. repec:pit:wpaper:270 is not listed on IDEAS
    18. Kuchibhotla, Murali & Orazem, Peter F. & Ravi, Sanjana, 2017. "The Scarring Effects of Youth Joblessness in Sri Lanka," ISU General Staff Papers 201707310700001029, Iowa State University, Department of Economics.

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