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Informal employment in developing countries

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  • Günther, Isabel
  • Launov, Andrey

Abstract

There is an ongoing debate among researchers and policy makers, whether informal sector employment is a result of competitive market forces or labor market segmentation. More recently it has been argued that none of the two theories sufficiently explains informal employment, but that the informal sector shows a heterogenous structure. For some workers the informal sector is an attractive employment opportunity, whereas for others – rationed out of the formal sector – the informal sector is a strategy of last resort. To test the empirical relevance of this hypothesis we formulate an econometric model which allows for several unobserved segments within the informal sector and apply it to the urban labor market in Côte d'Ivoire.

Suggested Citation

  • Günther, Isabel & Launov, Andrey, 2012. "Informal employment in developing countries," Journal of Development Economics, Elsevier, vol. 97(1), pages 88-98.
  • Handle: RePEc:eee:deveco:v:97:y:2012:i:1:p:88-98
    DOI: 10.1016/j.jdeveco.2011.01.001
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    References listed on IDEAS

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    More about this item

    Keywords

    Informal labor market; Segmentation; Comparative advantage; Selection bias; Finite mixture model;

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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