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A guide to multisector labor market models (English)

This paper approaches labor markets through multisector modeling. The first main substantive section presents the essence of multisector modeling, in particular, the role of labor market dualism. Given that labor markets often consist of quite distinct segments, a useful and insightful analytical approach is to start with just two interrelated segments. The second main substantive section is on models of wages and employment in the formal economy. This section covers 1) the market-clearing labor market model and the presumed equilibrating forces, 2) above-market-clearing wages set institutionally, 3) above-market-clearing wages set by efficiency wage considerations, and 4) above-market-clearing wages set by worker behavior. The third main substantive section is on wages and employment in the informal economy. This section presents three characterizations of informal sector labor markets: 1) the informal economy as a free-entry sector that prospective workers enter only as a last resort, 2) the informal economy as a desirable sector that workers choose in preference to formal sector work, and 3) the informal economy with its own internal dualism, combining 1) and 2). The fourth main substantive section is on intersectoral linkages. The models here are: 1) the integrated labor market model with full market clearing, 2) crowding models, and 3) the Harris-Todaro model.


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    Fields,Gary S.

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    Working Paper (Numbered Series)

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    The World Region,

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    A guide to multisector labor market models

  • Keywords

    Labor Market;informal sector;labor market model;terms and conditions of employment;marginal product of labor;public sector pay policy;measures of income inequality;market labor supply curve;household consumption per capita;free movement of labor;Informal Economy;labor market dualism;demand for labor;formal sector employment;high wage;class of model;formal sector worker;labor demand elasticity;marginal revenue product;human capital theory;efficiency wage model;wage set;labor market outcome;labor market segmentation;cost of transfer;cost of living;barriers to mobility;standard of living;human capital characteristics;equilibrium wage distribution;labor market opportunities;efficiency wage theory;urban informal sector;barrier to entry;men and child;number of workers;high failure rate;rate of failure;informal sector worker;formal school system;ownership of enterprise;labor demand curve;informal sector employment;amount of income;regional development bank;total wage bill;Computable General Equilibrium;behavior of firms;private sector counterpart;minimum wage law;human resource management;income from sources;keynesian macroeconomic model;union wage premium;labor market intervention;dual economy;



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Fields,Gary S.

A guide to multisector labor market models (English). Social protection discussion paper,no. SP 505 Washington, D.C. : World Bank Group.