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The Sri Lankan Unemployment Problem Revisited
Author(s) -
Rama Martín
Publication year - 2003
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/1467-9361.00206
Subject(s) - unemployment , economics , labour economics , economic rent , wage , public sector , job security , empirical evidence , macroeconomics , economy , market economy , work (physics) , mechanical engineering , philosophy , epistemology , engineering
High unemployment in Sri Lanka has been attributed to unrealistic expectations, to queuing for public sector jobs, and to stringent job security regulations. However, the empirical evidence supporting these explanations is weak. This paper analyzes individual records from the 1995 Labor Force Survey, and time series for wages in the formal and informal sectors of the economy. The paper rejects the unrealistic‐expectations hypothesis by comparing the impact of education on the actual wages of those who have a job and on the lowest acceptable wages of the unemployed. But it finds substantial rents associated with jobs in the public sector, and in activities protected by high tariffs or covered by job security regulations. A time‐series analysis of the impact of unemployment on wage increases across sectors suggests that many among the unemployed are waiting for “good” job openings, but are not interested in readily available “bad” jobs.