Labor markets in developing countries

This chapter covers selected topics for the 80% of the world's labor force that works in the developing countries. These topics are ones that have: (1) received relatively great attention in developing countries compared to developed economies (i.e., family enterprises, missing labor markets, geographical mobility, health/nutrition effects on productivity) because of their greater importance in developing countries; (2) been considered more extensively for developing than developed labor markets because the nature of institutions, behaviors and available data permit more extensive empirical examination of these topics (i.e., labor adjustments to shocks in the presence of imperfect markets, information problems in labor markets), and (3) been considered extensively for both developing and developed economies but with some different approaches and results for part of the developing country literature (e.g., determinants of and labor market returns to schooling). The discussion is organized around five broad topics: (1) The household enterprise model, surplus labor, disguised employment and unemployment, complete markets and separability, and labor supplies; (2) labor contracts, risks and incentives; (3) determinants of and returns to human capital investments (including health and nutrition in addition to schooling); (4) urban labor markets, labor-market regulations, international trade policies and manufacturing; and (5) distribution and mobility.