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Labor Market Policies in a Roy-Rosen Bargaining Economy

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  • Jales, Hugo
  • Yu, Zhengfei

Abstract

We study the effects of labor market policies using a bargaining model featuring compensating differentials (Rosen, 1986) and self-selection (Roy, 1951). The framework allows us to create a taxonomy of formal and informal employment. We use the model to estimate the effects of the minimum wage for the Brazilian economy using the "PNAD" dataset for the years 2001-2005. Our results suggest that, although the minimum wage generates unemployment and reallocation of labor to the informal sector, the policy might be desirable if the employment losses are concentrated in jobs characterized by low surplus.

Suggested Citation

  • Jales, Hugo & Yu, Zhengfei, 2020. "Labor Market Policies in a Roy-Rosen Bargaining Economy," GLO Discussion Paper Series 577, Global Labor Organization (GLO).
  • Handle: RePEc:zbw:glodps:577
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    References listed on IDEAS

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    1. Lavecchia, Adam M., 2020. "Minimum wage policy with optimal taxes and unemployment," Journal of Public Economics, Elsevier, vol. 190(C).
    2. Rafael La Porta & Andrei Shleifer, 2014. "Informality and Development," Journal of Economic Perspectives, American Economic Association, vol. 28(3), pages 109-126, Summer.
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    Cited by:

    1. Rodrigo Ceni & Gabriel Merlo, 2021. "Twenty years of job flows in an emerging country," Documentos de Trabajo (working papers) 21-10, Instituto de Economia - IECON.

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    More about this item

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market

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