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Urbanization and Labor Market Informality in Developing Countries


  • Gundogan, Naci
  • Bicerli, Mustafa Kemal


Rapid and uncontrolled migration created by the population moving from rural to urban areas causes serious problems from the viewpoint of labor markets. Increases in rural-urban migration flows is contributing to a larger urban labor supply. This increasing labor supply has produced an increasing urban unemployment rate and a deterioration in the quality of employment, as it is evident from the increased informal employment rates. One of the most distinctive features of the economies in developing countries is the fact that more than half of workers are employed in the urban informal sector. Urbanization and informal sector are joint and rising trends in these countries. The informal sector represents a significant part of the economy, and certainly of the labor market in developing economies, and plays a major role in employment creation, production and income generation.

Suggested Citation

  • Gundogan, Naci & Bicerli, Mustafa Kemal, 2009. "Urbanization and Labor Market Informality in Developing Countries," MPRA Paper 18247, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:18247

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    References listed on IDEAS

    1. Martha Alter Chen, 2007. "Rethinking the Informal Economy: Linkages with the Formal Economy and the Formal Regulatory Environment," Working Papers 46, United Nations, Department of Economics and Social Affairs.
    2. Fields, Gary S., 1975. "Rural-urban migration, urban unemployment and underemployment, and job-search activity in LDCs," Journal of Development Economics, Elsevier, vol. 2(2), pages 165-187, June.
    3. Fields,Gary S., 2005. "A guide to multisector labor market models," Social Protection and Labor Policy and Technical Notes 32547, The World Bank.
    4. Fields,Gary S., 2005. "A guide to multisector labor market models," Policy Research Working Paper Series 32547, The World Bank.
    5. Gundogan, Naci & Bicerli, Mustafa Kemal & Aydin, Ufuk, 2005. "The working poor: a comparative analysis," MPRA Paper 5096, University Library of Munich, Germany.
    6. David KUCERA & Leanne RONCOLATO, 2008. "Informal employment: Two contested policy issues," International Labour Review, International Labour Organization, vol. 147(4), pages 321-348, December.
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    Cited by:

    1. David Mayer-Foulkes, 2011. "Urbanization as a Fundamental Cause of Development," Working papers DTE 501, CIDE, División de Economía.
    2. Ghani, Ejaz & Kanbur, Ravi, 2013. "Urbanization and (in)formalization," Policy Research Working Paper Series 6374, The World Bank.

    More about this item


    urbanization; informal labor market; urban labor market; rural- urban migration; developing countries;

    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy

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