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Informality, self‐employment and heterogeneous managerial ability: A model for developing countries

Author

Listed:
  • Eliane Badaoui

    (UPN - Université Paris Nanterre)

  • Olivier Bargain

    (BSE - Bordeaux sciences économiques - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Prudence Kwenda

    (WITS - University of the Witwatersrand [Johannesburg])

  • Eric Strobl

    (UNIBE - Universität Bern = University of Bern = Université de Berne)

  • Frank Walsh

    (UCD - University College Dublin [Dublin])

Abstract

The view of informal employment as a last resort in the labour market has recently been challenged by numerous studies documenting the existence of a high degree of heterogeneity within the formal and informal sectors. In particular, informal self‐employment/employment may be voluntary or forced. There is currently not much theoretical support for these observations. We develop a theoretical model of the labour market with both formal and informal firms and a distribution of managerial skills in the population. Consistent with existing empirical evidence, this setup reconciles the undesirable and productive forms of self‐employment that coexist in the economy.

Suggested Citation

  • Eliane Badaoui & Olivier Bargain & Prudence Kwenda & Eric Strobl & Frank Walsh, 2023. "Informality, self‐employment and heterogeneous managerial ability: A model for developing countries," Post-Print hal-05459057, HAL.
    • Handle: RePEc:hal:journl:hal-05459057
    DOI: 10.1002/jid.3847
    as

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