nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2013‒09‒06
five papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Making Sense of Arab Labor Markets: The Enduring Legacy of Dualism By Assaad, Ragui
  2. Preferences for Employment Protection and the Insider-Outsider Divide By Guillaud, Elvire; Marx, Paul
  3. China's 2008 Labor Contract Law: Implementation and Implications for China's Workers By Gallagher, Mary; Giles, John T.; Park, Albert; Wang, Meiyan
  4. Minimum Wage and Job Mobility By Céspedes, Nikita; Sánchez, Alan
  5. Inequality of Opportunity in Health Care in China: Suggestion on the Construction of the Urban-Rural Integrated Medical Insurance System By Sun, Jiawei; Ma, Chao; Song, Ze; Gu, Hai

  1. By: Assaad, Ragui (University of Minnesota)
    Abstract: It is well-established that Arab labor markets share certain common characteristics, including an oversized public sector, high unemployment for educated youth, weak private sector dependent on government welfare for their survival, rapid growth in educational attainment, but much of it focused on the pursuit of formal credentials rather than productive skills, and low and stagnant female labor force participation rates. I argue in this paper that all of these features can be explained by the deep and persistent dualism that characterizes Arab labor markets as a result of the use of labor markets by Arab regimes as tool of political appeasement in the context of the "authoritarian bargain" social contract that they have struck with their citizens in the post-independence period. Even as fiscal crises have long destabilized these arrangements in most non-oil Arab countries, culminating in the dramatic political upheavals of the Arab spring revolutions, the enduring legacy of dualism will continue to strongly shape the production and deployment of human capital in Arab economies for some time. This will undoubtedly pose serious challenges to any efforts to transform these economies into dynamic, rapidly growing and more equitable globally competitive economies.
    Keywords: labor market dualism, Arab Spring, unemployment, education, authoritarian bargain
    JEL: I25 J21 J24 J31 J45 O53 P52
    Date: 2013–08
  2. By: Guillaud, Elvire (University of Paris 1 Panthéon-Sorbonne); Marx, Paul (University of Southern Denmark)
    Abstract: Insider-outsider theory suggests that in dual labour markets two groups have opposing preferences regarding protection against dismissals: insiders defend employment protection, because it increases their rents. Outsiders see it as a mobility barrier and demand deregulation. Similar divides are expected for unemployment benefits: as insiders and outsiders have diverging unemployment risks, they should demand different levels of protection. Although these views are influential in the political economy debate, there is little empirical research on the effect of contract types on social and labour market policy preferences. We use a novel data set collected in the most recent presidential contest in France, which combines detailed information on respondents' employment status with questions measuring attitudes towards dismissal regulation and other labour market policies. Going beyond insider-outsider theory, we argue and show empirically that the effect of membership in either segment is moderated by the employment situation in workers' occupation.
    Keywords: employment protection, insider-outsider theory, political preferences, France, single employment contract
    JEL: J08 J41 K31
    Date: 2013–08
  3. By: Gallagher, Mary (University of Michigan); Giles, John T. (World Bank); Park, Albert (Hong Kong University of Science & Technology); Wang, Meiyan (Chinese Academy of Social Sciences)
    Abstract: This paper presents empirical evidence from household and firm survey data collected during 2009-2010 on the implementation of the 2008 Labor Contract Law and its effects on China's workers. The government and local labor bureaus have made substantial efforts to enforce the provisions of the new law, which has likely contributed to reversing a trend toward increasing informalization of the urban labor market. Enforcement of the law, however, varies substantially across cities. The paper analyzes the determinants of worker satisfaction with the enforcement of the law, the propensity of workers to have a labor contract, workers' awareness of the content of the law, and their likelihood of initiating disputes. The paper finds that all of these factors are highly correlated with the level of education, especially for migrants. Although higher labor costs may have had a negative impact on manufacturing employment growth, this has not led to an overall increase in aggregate unemployment or prevented the rapid growth of real wages. Less progress has been made in increasing social insurance coverage, although signing a labor contract is more likely to be associated with participation in social insurance programs than in the past, particularly for migrant workers.
    Keywords: social insurance, informal sector, labor regulations, migration, gender, China
    JEL: J08 J16 J28 J41 J52 J53 O15 O17
    Date: 2013–08
  4. By: Céspedes, Nikita (Banco Central de Reserva del Perú; PUCP); Sánchez, Alan (GRADE)
    Abstract: We study the effects of the minimum wage in over employment and income by considering a monthly database that captures seven minimum wage changes registered between 2002 and 2011. We estimate that about 1 million workers have an income by main occupation in the neighbourhood of the minimum wage. We found that the minimum wage-income elasticity is statistically significant; the evidence also suggests that those who receive low incomes and those working in small businesses are the most affected by increases in the minimum wage. Employment effects are monotonically decreasing in absolute terms by firm size: moderate in big firms and higher in small firms. Results are robust when assessing the job-to-job transitions. Finally, we present evidence that supports the hypothesis that the minimum wage in Peru is correlated with income. The movement of income distribution in the context of changes in the minimum wage as well as the results provided by a model that captures the drivers of income justify this result.
    Keywords: Minimum wage, Labor mobility, Income dynamics, Informality
    JEL: E24 E26 J20 J21 J61
    Date: 2013–08
  5. By: Sun, Jiawei; Ma, Chao; Song, Ze; Gu, Hai
    Abstract: This paper investigates the urban-rural inequality of opportunity in health care in China based on the theory of equality of opportunity of Roemer (1998). Following the compensation principle proposed by Fleurbaey and Schokkaert (2011), this paper establishes a decomposition strategy of the fairness gap, which we use for the measurement of the inequality of opportunity in the urban-rural health care use. Empirical analysis using the CHNS data shows that the ratios of the fairness gap to the directly observed average urban-rural difference in health care are 1.167 during 1997-2000 and 1.744 during 2004-2006, indicating that the average urban-rural difference observed directly from original statistical data may underestimate the degree of the essential inequity. Meanwhile, the increasing fairness gap and the decomposition results imply that generally leveling the urban-rural reimbursement ratios is probably not sufficient, and pro-disadvantage policies should be put in place in order to mitigate or even eliminate the inequality of opportunity in health care use between urban and rural residents. The results are also illuminating for the experiments and establishment of the urban-rural integrated medical insurance system (URIMIS) in China. The pro-disadvantage policies will be more appreciated and effective in the promotion of the equality of opportunity in health care, within the background of urban-rural dualistic social structure and widening urban-rural income gap. This suggestion is supported by data from the URIMIS pilot regions in Jiangsu province. The results show that the fairness gap can be narrowed significantly via pro-disadvantage policies.
    Keywords: equality of opportunity; health care; fairness gap; urban-rural integrated medical insurance system
    JEL: D12 D63 I18
    Date: 2013–09–01

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