This paper examines the adjustment of developing country labor markets to macroeconomic shocks. It models a two sector labor market: a formal salaried (tradable) sector that may or may not be affected by union or legislation induced wage rigidities, and an unregulated (nontradable)...

This paper examines the adjustment of developing country labor markets to macroeconomic shocks. It models as having two sectors: a formal salaried (tradable) sector that may or may not be affected by union or legislation induced wage rigidities, and an informal (nontradable) self-employment...

Informal self-employment is a major source of employment in developing countries. Its cyclical behavior is important to our understanding of the functioning of LDC labor markets, but turns out to be surprisingly complex. We develop a flexible model with two sectors: a formal salaried (tradable)...