Optimal Labor Market Policy in Developing Countries: A General Equilibrium Analysis
October 24, 2025 ECON
| TOPIC | Optimal Labor Market Policy in Developing Countries: A General Equilibrium Analysis |
| TIME&DATE | 10:30 am - 12:00 pm, October 24, 2025 (Friday) |
| Venue | Room 904, Teaching Complex D Building |
| Speaker | Mitchell VanVuren Vanderbilt University |
| Abstract | Workers in developing countries face substantial constraints to job search. Many policies aim to lower search barriers and expand the wage sector, but the efficiency and optimality of these policies remain unclear. This paper develops a search-and-matching model that incorporates key features of developing economies including a large self-employment sector, savings-constrained households, and capital-constrained firms. Four search externalities — two positive and two negative — emerge, leading to inefficiency. After estimating the model using an experiment that provided search subsidies to job seekers in Ethiopia, I find that the optimal policy is a tax that substantially increases the cost of search, rather than a subsidy. |
| Biography | Mitchell VanVuren is an Assistant Professor of Economics at Vanderbilt University. He is a macroeconomist primarily interested in questions of growth and development. He is interested in combining microdata and experimental results with macroeconomic models to better inform our understanding of these phenomena at an aggregate level and the challenges that may come with scaling up small-scale interventions to the level of an entire economy. To this end, he uses and develops new computational techniques to capture the high levels of heterogeneity found in microdata. |
