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Title: Risk attitudes and informal employment in a developing economy
Authors: Bennett, J
Gould, M
Rablen, MD
Keywords: Risk attitudes;Informality;Self employment
Issue Date: 2012
Publisher: Springer
Citation: IZA Journal of Labor & Development, 1(1), 1-17, 2012
Abstract: We model an urban labour market in a developing economy, incorporating workers’ risk attitudes. Trade-offs between risk aversion and ability determine worker allocation across formal and informal wage employment, and voluntary and involuntary self employment. Greater risk of informal wage non-payment can raise or lower informal wage employment, depending on the source of risk. Informal wage employment can be reduced by increasing detection efforts or by strengthening contract enforcement for informal wage payment. As the average ability of workers rises, informal wage employment first rises, then falls. Greater demand for formal production may lead to more involuntary self employment.
Description: © 2012 Bennett et al.; licensee Springer. This is an Open Access article distributed under the terms of the Creative Commons Attribution License(,which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
ISSN: 2193-9020
Appears in Collections:Economics and Finance
Dept of Economics and Finance Research Papers

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