Calendrier du 05 mai 2020
Applied Economics Lunch Seminar
Du 05/05/2020 de 12:30 à 13:30
Salle R2-01, Campus Jourdan, 48 boulevard Jourdan, 75014 Paris
SCARELLI Thiago (PSE)
Constrained Own-Account Work in Developing Markets: Evidence from Brazil - Reporté
This study explores a fundamental trade-off imposed by imperfect labor markets: individuals may work on their own at any time, but they can only occupy a potentially more productive wage job after a search period. We formalize this intuition using a simple extension of the canonical job search framework, which leads to a set of implications that can help to explain the prevalence of own-account work in developing labor markets. In particular, we show that a suffciently high time discount rate can rationalize the puzzling choice of own-account work when it offers a lower instantaneous return relative to wage employment. In the second half of this research, we use this theoretical structure to empirically characterize the minimum discount rate that is consistent with the observed occupational decisions of Brazilian own-account workers given the wage employment opportunities they potentially face. In our baseline speciffication, we find that in nearly 70% of the cases the lower bound implied by the observed choices is strictly above the rates available on the credit market, which we interpret as evidence of a financially constrained occupational choice. This result suggests that the majority of own-account work in Brazil is driven by the combination of labor market frictions and financial market failures.