Unemployment Insurance, Job Search, and Informal Employment

David Margolis (1) , Lucas Navarro (2) , David A. Robalino (3)

1 CES - Centre d'économie de la Sorbonne
2 ILADES
3 Social Protection and Labor Sector, Human Development Department

This paper analyses the potential impacts of introducing unemployment insurance (UI) in middle income countries using the case of Malaysia, which today does not have such a system. The analysis is based on a job search model with unemployment and three employment sectors: formal and informal wage employment, and self employment. The parameters of the model are estimated to replicate the structure of the labor market in Malaysia in 2009 and the distribution of earnings for informal, formal and self employed workers. The results suggest that unemployment insurance would have only a modest negative effect on unemployment if benefits are not overly generous. The main effect would be a reallocation of labor from wage into self employment while increasing average wages in the formal and informal sectors.

Mots clés: Unemployment insurance; Informal sector; Self employment; Job search

Domaines: Economies et finances

David Margolis, Lucas Navarro, David A. Robalino. Unemployment Insurance, Job Search, and Informal Employment. Markus Froelich, David Kaplan, Carmen Pages, Jamele Rigolini, David Robalino. Social Insurance, Informality, and Labor Markets How to Protect Workers While Creating Good Jobs, Oxford University Press, à paraître, 2014, 978-0-19-968523-3. ⟨hal-00714372⟩