Ravi Kanbur, Arnab K Basu, Nancy H Chau,
Mon, 07/18/2011 - 00:00
The authors of CEPR DP8485 analyze two stylized views of formal and informal labor markets: 1) that the informal sector is competitive and 2) that contract enforcement in the informal sector is not possible. They argue these two "facts" are incompatible. In informal sectors, the lack of contract enforcement does in fact bestow market power on employers over workers, distorting competitiveness in these markets.