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The formal sector wage premium and firm size for self-employed workers
Bargain, Olivier; Badaoui, Eliane; Kwenda, Prudence; Strobl, Eric; Walsh, Frank
We develop a model where workers may enter self-employment or search for jobs as employees and where there is heterogeneity across workers’ managerial ability. Workers with higher skills will manage larger firms while workers with low managerial ability will run smaller firms and will be in self-employment only when they cannot find a salaried job. For these workers self-employment is a secondary/informal form of employment. The Burdett and Mortensen (1998) equilibrium search model is used for illustration as a special case of our more general framework. Empirical evidence from Mexico is provided and demonstrates that firm size wage effects for employees and self-employed workers are broadly consistent with the model. Not applicable ab - TS 27.03.12
Keyword(s): Self-employment; Managerial ability; Informal sector; J31; O17; Self-employed; Executive ability; Informal sector (Economics)
Publication Date:
2012
Type: Working paper
Peer-Reviewed: Unknown
Language(s): English
Institution: University College Dublin
Publisher(s): University College Dublin. School of Economics
File Format(s): other; application/pdf
First Indexed: 2012-08-25 05:15:35 Last Updated: 2018-10-11 15:55:35