Risk attitudes and informal employment in a developing economy

© 2012 Bennett et al.; licensee Springer. This is an Open Access article distributed under the terms of the Creative Commons Attribution License(http://creativecommons.org/licenses/by/2.0),which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.We model an urban labour market in a developing economy, incorporating workers’ risk attitudes. Trade-offs between risk aversion and ability determine worker allocation across formal and informal wage employment, and voluntary and involuntary self employment. Greater risk of informal wage non-payment can raise or lower informal wage employment, depending on the source of risk. Informal wage employment can be reduced by increasing detection efforts or by strengthening contract enforcement for informal wage payment. As the average ability of workers rises, informal wage employment first rises, then falls. Greater demand for formal production may lead to more involuntary self employment

The Inter-related Dynamics of Unemployment and Low-Wage Employment

This paper examines the extent of state dependence in unemployment and the role played in this by intervening low-wage employment. A range of dynamic random and fixed effects estimators are compared. Low-wage employment is found to have almost as large an adverse effect as unemployment on future prospects and the difference in their effects is found to be insignificant. Evidence is presented that low-wage jobs act as the main conduit for repeat unemployment and considerably increases its probability. Obtaining a higher-wage job reduces the increased risk of repeat unemployment to insignificance.Unemployment dynamics ; low-wage employment ; State dependence ; unobserved heterogeneity ; dynamic random effects models ; repeat unemployment

Self-Employment Dynamics, State Dependence and Cross-Mobility Patterns

This paper analyzes the mobility between self-employment, wage employment and non-employment. Using data for men in West Germany, we find strong true state dependence in all three states. Moreover, compared to wage employment, non-employment increases the probability of self-employment significantly, and selfemployment goes along with a higher risk of future non-employment.Self-Employment, State Dependence, Labor Market Dynamics, Unemployment

The wage labor market and inequality in Viet Nam in the 1990s

Has the expansion of wage employment in Vietnam exacerbated social inequalities, despite its contribution to income growth? Gallup uses the two rounds of the Vietnamese Living Standards Survey (VLSS) to evaluate the contribution of wage employment to inequality and income growth over the period of rapid economic growth in the 1990s following market reforms. If Vietnam sustains its economic development in the future, wage employment will become an ever more important source of household income as family farms and self-employed household enterprises become less prevalent. Observing the recent evolution of wage employment compared with farm and non-farm self-employment provides clues as to how economic development will change Vietnamese society, in particular its impact on income inequality within and between communities. The author shows that standard methods for calculating income inequality can be severely biased due to measurement error when decomposing the contribution of different sectors, regions, or groups to overall inequality. A new method for consistent decomposition of inequality by income source shows that despite the rapid growth of wages in the 1990s, wage inequality fell modestly. Contrary to the results of uncorrected methods, wage employment contributes a roughly similar amount to overall income inequality as other nonagricultural employment (household enterprise and remittances, mainly). Agricultural income actually reduces overall income inequality because inequality between agricultural households is much lower than inequality between nonagricultural households, and agricultural income has a lower correlation with other income sources. Wage employment has not been the locus of growing disparity between the haves and the have-nots in Vietnam. A declining share of agriculture as the economy grows in Vietnam means that income inequality will rise, assuming that within-sector inequality does not change. This rising inequality, due to the shrinking share of agriculture, will be difficult to avoid without giving up economic growth and rapid poverty reduction in Vietnam. Historically, the process of economic development has always brought about a transition out of small farms and household enterprises into wage employment as worker productivity increases and non-household enterprises dominate the economy.Economic Theory&Research,Poverty Impact Evaluation,Labor Policies,Environmental Economics&Policies,Services&Transfers to Poor,Inequality,Environmental Economics&Policies,Poverty Impact Evaluation,Governance Indicators,Services&Transfers to Poor

The inter-related dynamics of unemployment and low-wage employment

This paper examines the extent of state dependence in unemployment and the role played in this by intervening low-wage employment. A range of dynamic random and fixed effects estimators are compared. Low-wage employment is found to have almost as large an adverse effect as unemployment on future prospects and the difference in their effects is found to be insignificant. Evidence is presented that low-wage jobs act as the main conduit for repeat unemployment and considerably increases its probability. Obtaining a higher-wage job reduces the increased risk of repeat unemployment to insignificance

Self-Employment Dynamics, State Dependence and Cross-Mobility Patterns

This paper analyzes the mobility between self-employment, wage employment and non-employment. Using data for men in West Germany, we find strong true state dependence in all three states. Moreover, compared to wage employment, non-employment increases the probability of self-employment significantly, and self-employment goes along with a higher risk of future non-employment.self-employment, state dependence, labor market dynamics, unemployment

Wage-Employment Contracts: Global Results

This paper studies the efficient agreements about the dependence of workers' earnings on employment, when the employment level is controlled by firms. The firms ' superior information about profitability conditions is responsible for this form of contract governance. Under plausible assumptions, such agreements will cause employment to diverge from efficiency as a byproduct of their attempt to mitigate risk. It is shown that, if leisure is a normal good and firms are risk neutral, employment is always above the efficient level. Such a one-period implicit contracting model cannot, therefore, be used to "explain" unemployment as a rational byproduct of risk sharing between workers and a risk neutral firm under conditions of asymmetric information.

Low-wage employment in Portugal: a mixed logit approach

In this paper, we examine the determinants of low-wage employment in Portugal. For this purpose, we use a data file of the European Community Household Panel (ECHP) for the years 1998 and 1999. In order to take into account unobserved heterogeneity in the data, a random-parameter logit model is used to analyse the probability of a worker receiving a low wage. The results indicate that the consideration that the effects of the explanatory variables are the same across all individuals, such as is assumed in most of the literature may be misleading. From the policy perspective, this implies that the use of a single instrument in order to combat low-wage employment is inappropriate to satisfy the whole population. In view of this, policies tailored by clusters would be more appropriate.low-wage employment, random-parameter logit model, public policy.

The Effect of Minimum Wage on Youth Employment and Unemployment in Taiwan

Minimum wage, Employment rate, Labor participation rate, Unemployment rate

Self-employment, wage employment and informality in a developing economy

This article has been made available through the Brunel Open Access Publishing Fund.We construct a simple model incorporating various urban labour market phenomena obtaining in developing economies, and we give a diagrammatic formulation of the market equilibrium. Our initial formulation assumes an integrated labour market and allows for entrepreneurship, self-employment, and wage employment. We then introduce labour market segmentation. In equilibrium voluntary and involuntary self-employment, formal and informal wage employment, and formal and informal entrepreneurship may all coexist. We illustrate the model by an example calibrated on Latin American data, examining individual labour market transitions and implications of education/training and labour market policies