Labor Market Search, Informality, and On-The-Job Human Capital Accumulation

Bobba, Matteo, Flabbi, Luca, Levy, Santiago and Tejada, Mauricio (2019) Labor Market Search, Informality, and On-The-Job Human Capital Accumulation. TSE Working Paper, n. 19-983, Toulouse

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We develop a search and matching model where firms and workers produce output that depends both on match-specific productivity and on worker-specific human capital. The human capital is accumulated while working but depreciates while searching for a job. Jobs can be formal or informal and firms post the formality status. The equilibrium is characterized by an endogenous steady state distribution of human capital and by an endogenous formality rate. The model is estimated on longitudinal labor market data for Mexico. Human capital accumulation on-the-job is responsible for more than half of the overall value of production and upgrades more quickly while working formally than informally. Policy experiments reveal that the dynamics of human capital accumulation magnifies the negative impact on productivity of the labor market institutions that give raise to informality.

Item Type: Monograph (Working Paper)
Language: English
Date: January 2019
Place of Publication: Toulouse
Uncontrolled Keywords: Labor market frictions, Search and matching, Nash bargaining, Informality, On-the-Job human capital accumulation
JEL Classification: J24 - Human Capital; Skills; Occupational Choice; Labor Productivity
J3 - Wages, Compensation, and Labor Costs
J64 - Unemployment - Models, Duration, Incidence, and Job Search
O17 - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements - Legal, Social, Economic, and Political
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 16 Jan 2019 08:43
Last Modified: 02 Oct 2019 23:04
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