A Guide to Multisector Labor Market Models

Abstract

[Excerpt] This is a paper on labor markets. Why are labor markets important to economic development? Many individuals and institutions, including the World Bank and the regional development banks, seek “a world free of poverty.” Broadly speaking, those who are poor are poor because 1) they earn little from the work they do, 2) the societies in which they live are too poor to provide them with substantial goods and services by virtue of their citizenship or residency, and 3) the poor are not permitted to move to richer countries. Thus, anti-poverty efforts can be focused on 1) helping people as workers (defined broadly to include wage employees, informal employees, and the self-employed in all ranges of the skill distribution), 2) helping people as citizens/residents through publicly-provided goods and services, and 3) striving for freer movement of labor from poor to rich countries. This paper is concerned with the first channel: helping improve labor market opportunities for workers.