Estimating disguised unemployment in major middle-income countries by means of non-linear input–output analysis, 2000–2014

Abstract

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 So stated, this hypothesis implies a way to measure non-open unemployment: by the amount of labour that must be withdrawn from the market for relative wages to change.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.