joint with the Département de sciences économiques, Université de Montréal
room C-6070-9 (U. de Montréal, Pavillon Lionel-Groulx, 3150, rue Jean-Brillant)
Organizer : João Galindo da Fonseca (U. de Montréal)
Abstract : Many developing countries exhibit a puzzling pattern given their scarce human capital: unemployment rates increase with or are hump-shaped with education. We develop and estimate a model where educated unemployment arises from heterogeneous workers participating in a frictional labor market with three sectors (public, private, and self-employment). We estimate that public sector distortions explain around two-thirds of educated unemployment in Burkina Faso and one-quarter in Senegal. We then simulate three equally costly policies. In contrast with public job creation and subsidies to self-employment income, subsidies for private sector vacancy creation reduce educated unemployment and improve workers’ welfare.