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Labor market search, informality, and on-the-job human capital accumulation

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  • Bobba, Matteo
  • Flabbi, Luca
  • Levy, Santiago
  • Tejada, Mauricio

Abstract

We develop a search and matching model where firms and workers produce output that depends both on match-specific productivity and worker-specific human capital. The human capital is accumulated while working but depreciates while searching for a job. Jobs can be formal or informal. The model is estimated on labor market data for Mexico. Human capital accumulation is responsible for more than half of the overall value of production, and upgrades more quickly while working formally than informally. Policy experiments reveal that human capital accumulation magnifies the negative impact on productivity of the labor market institutions that give rise to informality.

Suggested Citation

  • Bobba, Matteo & Flabbi, Luca & Levy, Santiago & Tejada, Mauricio, 2021. "Labor market search, informality, and on-the-job human capital accumulation," Journal of Econometrics, Elsevier, vol. 223(2), pages 433-453.
  • Handle: RePEc:eee:econom:v:223:y:2021:i:2:p:433-453
    DOI: 10.1016/j.jeconom.2019.05.026
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    More about this item

    Keywords

    Labor market frictions; Search and matching; Nash bargaining; Informality; On-the-job human capital accumulation;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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