Recession in the skilled sector and implications for informal wage

Global financial crisis has affected the white goods, white collared sector in many developing countries. However, preponderance of large unorganized sectors in such countries must be factored in before one predicts its depth and severity for the entire economy. We postulate analytically that recession in the skilled sector may actually increase real informal wage and despite temporal contraction, countries with large informal sectors would not be deeply affected unlike economies with strict formal regulations. Numerical examples are constructed to capture the extent of changes in informal wage. (C) 2010 University of Venice. Published by Elsevier Ltd. All rights reserved.