There is little evidence to support the traditional dualistic view of a labor market segmented between formal and informal sectors as the principal paradigm through which to view the informal sector. The division between good jobs and bad jobs seems to cut across issues of formality-and for many workers, inefficient labor codes and low levels of human capital may make employment in the informal sector more desirable.There is a long tradition of viewing as disadvantaged the roughly 40 percent of workers in developing countries who areunprotected by labor legislation and work in small informal firms.Maloney offers an alternative to traditional views of the relationship between formal and informal labor markets: For many workers, inefficiencies in present labor codes and relatively low levels of human capital (labor productivity) may make employment in the informal sector more desirable.He offers the first study of worker transitions among sectors, using detailed panel data from Mexico, and finds little evidence to support the traditional dualistic view.He shows that traditional earning differentials cannot prove or disprove segmentation in developing countries, and patterns of worker mobility do not suggest a rigid labor market-or one segmented into formal and informal divisions. It is possible that the market is dualistic in the sense used in the industrial world, but the division between good jobs and bad jobs seems to cut across issues of formality.This paper-a product of the Poverty and Economic Management Unit, Latin America and the Caribbean Region- is part of a larger effort in the region to reexamine the role of the informal sector. The author may be contacted at [email protected].

This paper deals with labor market structures in developing countries and the impact of government policies on rural and urban labor markets. The central concern in analyses of employment is absorption of labor. Governments try to influence the demand for labor so that more members of the labor force are absorbed into productive employment. Employment outcomes are often the by-products of government policies that affect economic growth as a whole. This paper concentrates on factors that influence the structure and functioning of labor markets. In Chapter 1, a schematic picture of labor markets is presented. Chapters 2 and 3 analyze the salient features of the workings of rural and urban labor markets and discuss some important government policies that affect the functioning of these markets. The paper concludes that Government intervention in both rural and urban labor markets has often been less than successful, sometimes because their policies were based on incorrect assumptions. At other times, these policies have achieved less because the government also adopted other policies that tended to contradict the goal of providing jobs.

Seminar paper from the year 2003 in the subject Economics - Other, grade: 2 (B), University of Freiburg (Economics), course: Job Markets in Developing Nations, language: English, abstract: The majority of the world’s population lives and works in developing countries. This paper examines what might be the difference between labor markets in developing and developed countries. The paper first briefly looks at various definitions of the term “developing country”. It then starts with the topic of migration, whose causes and consequences will be described. A look at labor legislation follows with a focus on unemployment protection and insurance as well as minimum wages. Then, the paper examines how wages are determined when labor is organized and how centralized the wage setting process takes place. The key difference that might be most intuitive of all is next. Dualistic markets, the concept of formal and informal sectors, are analyzed. The paper ends with various social aspects, such as the role of women, child labor as well as health and nutrition, that separate labor markets in developing nations from developing countries.

Abstract: This paper presents a selective overview of the literature on modeling labor market policies in developing countries. It considers welfare economics, theoretical models, and empirical evidence to highlight the three general features needed in future research on labor market policy in developing countries. The author identifies desirable research components (welfare economics, theoretical modeling, and empirical modeling) and pitfalls in the literature (inappropriate use of productivity, reliance on wrong kinds of empirical studies, lack of cost-benefit analysis, attention to only a subset of the goods and bads, and fallacy of composition). The paper concludes with suggested topics and methods for future research. The author states that sound labor market policy requires sound labor market models. The paper makes a case for developing policy based on explicit evaluation criteria, specific theoretical models, and comprehensive empirical evidence.