The formal sector wage premium and firm size for self-employed workers

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Title: The formal sector wage premium and firm size for self-employed workers
Authors: Bargain, Olivier
Badaoui, Eliane
Kwenda, Prudence
Strobl, Eric
Walsh, Frank
Permanent link: http://hdl.handle.net/10197/3719
Date: Mar-2012
Abstract: 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.
Funding Details: Not applicable
Type of material: Working Paper
Publisher: University College Dublin. School of Economics
Keywords: Self-employmentManagerial abilityInformal sector
Subject LCSH: Self-employed
Executive ability
Informal sector (Economics)
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Economics Working Papers & Policy Papers

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