Ethnic Diversity, Market Structure and Risk Sharing in Developing Countries

35 Pages Posted: 13 Feb 2006

See all articles by Yves Zenou

Yves Zenou

Stockholm University; Monash University - Department of Economics; Research Institute of Industrial Economics (IUI); IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

Mohamed Jellal

affiliation not provided to SSRN

Date Written: December 2005

Abstract

The paper mainly addresses three questions: 1) do workers tend to be employed by employers of the same ethnic group; 2) what is the structure of the equilibrium wage contract; and 3) do more ethnically homogeneous labour markets tend to have different labour contracts than more ethnically diversified ones. The answer to the first question is in the affirmative - in equilibrium all employers offer the same wage contract and workers are hired by employers of the closest ethnic affiliation. In terms of the equilibrium wage contract, its nature depends on the attitude towards risk of both sides of the market. Finally, the answer to the third question is also in the affirmative since the more homogenous the labour market, the more deterministic is the wage.

Keywords: Ethnicity, sharecropping, piece rates

JEL Classification: D43, J33, O12

Suggested Citation

Zenou, Yves and Zenou, Yves and Jellal, Mohamed, Ethnic Diversity, Market Structure and Risk Sharing in Developing Countries (December 2005). CEPR Discussion Paper No. 5366, Available at SSRN: https://ssrn.com/abstract=883704

Yves Zenou (Contact Author)

Stockholm University ( email )

Universitetsvägen 10
Stockholm, Stockholm SE-106 91
Sweden

Monash University - Department of Economics ( email )

Australia

Research Institute of Industrial Economics (IUI) ( email )

P.O. Box 5501
S-114 85 Stockholm
Sweden

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Mohamed Jellal

affiliation not provided to SSRN

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