Discussion Paper Details

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Title: Growth and Labour Markets in Developing Countries

Author(s): Mathan Satchi and Jonathan Temple

Publication Date: February 2006

Keyword(s): dual economies, informal sector, matching frictions and urban unemployment

Programme Area(s): Institutions and Economic Performance and International Macroeconomics

Abstract: 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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Bibliographic Reference

Satchi, M and Temple, J. 2006. 'Growth and Labour Markets in Developing Countries'. London, Centre for Economic Policy Research.