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Growth and labour markets in developing countries

  • Mathan Satchi
  • Jonathan Temple


In middle-income countries, the informal sector often accounts for a substantial fraction of urban employment. We develop a general equilibrium model with matching frictions in the urban labour market, the possibility of self-employment in the informal sector, and scope for rural-urban migration. We investigate the effects of different types of growth on wages and the informal sector, and the extent to which labour market institutions can influence aggregate productivity. We quantify these effects by calibrating the model to data for Mexico, a country with a sizeable informal sector and significant labour market rigidities.

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Paper provided by Department of Economics, University of Bristol, UK in its series Bristol Economics Discussion Papers with number 06/581.

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Length: 52 pages
Date of creation: Jan 2006
Date of revision:
Handle: RePEc:bri:uobdis:06/581
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