Informal employment is ubiquitous in developing countries, but few studies have estimated workers' switching costs … between informal and formal employment. This paper builds on the empirical literature grounded in discrete choice models to … employment are significantly lower than the costs of entry in formal employment. Simulations of labor-market adjustments caused …

present an integrated approach to wage and employment determination in an economy where firms pay above market efficiency … wages to prevent trained workers from quitting. The model offers predictions about the behavior of formal employment, labor …), changes in the desirability of self-employment (formal sector tax rates), and the cost of training a new worker. They use …