ABSTRACT
This chapter focuses on the logic of employment in the formal and informal sectors. It examines two bodies of theory that aim to explain why people migrate: one when the decision to migrate is taken at the individual level; the other when it is taken at the household level. The chapter then considers international migration and look at its impact on the communities and countries from which migrants come, as well as on the receiving countries. Given the fact that there is little open unemployment in developing countries due to lack of unemployment insurance and other formal social safety nets, there is a bigger underemployment than unemployment problem. Empirical results for Colombia show that the countercyclical effect is supported empirically. An increase in non-wage costs and in the minimum wage in the formal sector had a large positive effect on informal employment and a negative effect on informal wages.
