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An Occupational Choice Model for Developing Countries

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  • Gerardo Jacobs

Abstract

Most occupational choice models introduce only two options for agents: entrepreneurial activities or wage-employment. However, these models represent inadequately the labor force distribution from developing countries, where an important proportion of the total work force are self-employed workers. Some models introduce self-employment as an occupational choice. These works have a common feature : at equilibrium, wage earners belong to the lower end of the income distribution. However, for a large set of developing countries, peasants and small proprietors are part of a self employment sector that can mostly be found in the lower end of the income distribution. In this work, in contrast with previous efforts, self-employment formation is consistent with data from most developing countries. We pay special attention to the conditions under which either the economy ends in a low income equilibrium, where self-employment is the only form of production; or alternatively, a high income equilibrium with a well developed labor market. We study some public policy issues, paying special attention to role of capital markets and the efficiency of schooling.

Suggested Citation

  • Gerardo Jacobs, 2007. "An Occupational Choice Model for Developing Countries," Proceedings of the German Development Economics Conference, Göttingen 2007 15, Verein für Socialpolitik, Research Committee Development Economics.
  • Handle: RePEc:zbw:gdec07:6538
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    References listed on IDEAS

    as
    1. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-298, April.
    2. Psacharopoulos, George, 1994. "Returns to investment in education: A global update," World Development, Elsevier, vol. 22(9), pages 1325-1343, September.
    3. van Praag, C M & Cramer, J S, 2001. "The Roots of Entrepreneurship and Labour Demand: Individual Ability and Low Risk Aversion," Economica, London School of Economics and Political Science, vol. 68(269), pages 45-62, February.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Occupational Choice; Human Capital; Economic Development; General Equilibrium;

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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