When trade reform contracts protected formal sectors in developing countries and the formal workers move to the informal sector for employment, does that reduce informal wages? Using a 2 × 2 Heckscher-Ohlin-Samuelson (HOS) structure with formal-informal production organization for the same...

type="main" <p>Several recent empirical papers show that unemployment benefits crowd out nascent entrepreneurs. In the present paper provide theoretical support in favour of this interesting result. Over fairly general preference patterns we obtain a measure of the opportunity cost of entrepreneurs...</p>