Essays on the Impact of Labour Market Informality and Labour Mobility on Macroeconomic Fluctuations in a Typical Sub-Saharan African Economy.

Student thesis: Doctoral ThesisPhD

Abstract

The thesis comprises three essays that analyse the impact of labour market informality and labour mobility on macroeconomic fluctuations in a typical Sub-Saharan African economy, specifically Ghana. The first chapter constructs two New Keynesian DSGE models with labour market frictions, one with and one without informality, and finds that informality dampens the response of aggregate unemployment and output while
amplifying the response of aggregate inflation to aggregate demand and monetary policy shocks. Informality amplifies the response of aggregate inflation, while dampening the impact of aggregate unemployment to aggregate technology shocks. It, however, makes aggregate output marginally responsive to aggregate technology shocks. The second chapter examines the impact of intersectoral labour mobility between formal and informal labour markets in SSA economies and finds that such mobility dampens the responses of aggregate unemployment, output, and inflation to aggregate demand, aggregate technology and monetary policy shocks. The third chapter tests the predictive performance of the theoretical models against actual data from Ghana, using Bayesian VARs with sign restrictions from the theoretical models to identify aggregate demand and technology shocks. We find that the One Sector (without informality) model approximates the response of inflation, output, and interest rates best to a positive aggregate demand shock, while the Two Sector Complete Labour Mobility (with informality) model produces the best approximation of the response in the data to aggregate demand shocks when it comes to unemployment. On the other hand, the Two Sector models perform better in approximating the response of inflation, output and interest rates in the Ghana data to a positive aggregate technology shock, with the No Labour Mobility version performing better than the Complete Labour Mobility model. As with aggregate demand shocks, the No Labour Mobility (with informality) version generates the worst match to the data when it comes to unemployment response to aggregate technology shocks.
Date of Award25 Aug 2023
Original languageEnglish
Awarding Institution
  • University of Bath
SupervisorChristopher Martin (Supervisor) & Nikolaos Kokonas (Supervisor)

Keywords

  • Informal Labour Markets
  • Sub-Saharan Africa
  • Macroeconomic Fluctuations
  • Labour Mobility

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