According to the disguised-unemployment hypothesis, significant wage differences between sectors in less-developed countries result from segmented labour markets and overcrowding of the flexible market segment. So stated, this hypothesis implies a way to measure non-open unemployment: by the amount of labour that must be withdrawn from the market for relative wages to change. Indeed, it is possible to undertake the exercise of comparing the actual employment of a country with a simulated ‘non-dualistic’ employment by means of a non-linear input-output model and taking the US wage structure as a benchmark. This simulation experiment was carried out for seven middle-income countries (Brazil, China, Indonesia, India, Russia, Mexico, and Turkey) using data from the 2016 Release of the World Input-Output Database. The results of the study are consistent with the disguised-unemployment hypothesis, as well as with related literature.
According to the disguised-unemployment hypothesis, significant wage differences between sectors in less-developed countries result from segmented labour markets and overcrowding of the flexible market segment. So stated, this hypothesis implies a way to measure non-open unemployment: by the amount of labour that must be withdrawn from the market for relative wages to change. Indeed, it is possible to undertake the exercise of comparing the actual employment of a country with a simulated ‘non-dualistic’ employment by means of a non-linear input-output model and taking the US wage structure as a benchmark. This simulation experiment was carried out for seven middle-income countries (Brazil, China, Indonesia, India, Russia, Mexico, and Turkey) using data from the 2016 Release of the World Input-Output Database. The results of the study are consistent with the disguised-unemployment hypothesis, as well as with related literature. Read More
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