Labor Market Sorting and Social Security in Developing Countries

Speaker: Dr Han Gao

Affiliation: University of New South Wales

Location: Room 210, Chamberlain Building (#35), UQ St Lucia Campus.

Online via Zoom:  https://uqz.zoom.us/j/82603079317 

Abstract

Large informal labor markets determine not only the current taxes and earnings of workers but also future eligibility to Social Security (SS) payments. In this work, we study the case of Brazil where roughly 30 percent of employment is informal. We build an equilibrium life cycle labor search model in which firms post contracts specifying job formality and wages on the job and calibrate the model to match worker transitions across the formal and informal sectors over the life cycle and sorting between firm size, formality, and worker skills in the cross section. We, then, perform various counterfactual experiments to understand how changes to the financing of the pension system may affect firm's contract posting decisions and sorting between workers and firms. We find that policy reforms that weaken the linkage between formality and Social Security contributions lead to an increase in aggregate vacancies and formal share, which stimulate the fluidity of labor market and benefit low-skilled workers more.

About the presenter's meeting

If you would like to meet with Dr Gao, please contact Dr Satoshi Tanaka