{"word_count": 732, "character_count": 4985}
By Ramses H Abul Naga,  Reader in Economics, University of Aberdeen, IMéRA fellow in partnership with AMSE - Aix-Marseille School of Economics.Cars are cars all over the world. But what about labour markets, are they broadly the same wherever you go?Developingcountries are indeed very different when it comes to the functioning of theirlabour markets. Agriculture remains to date arelatively important share of output in developing countries. Two central features of the developing countrycontext are the role of the extend family in determining work related tasks,and the organisation of production employment and consumption around the familyfarm or firm.Thecentral mechanism of the process of economic development, as economists like tothink about it, is the transfer of resources from low productivity areas ofactivity to high productivity hubs, often located in urban centres. Thus urbanlabour markets are dualistic with theinformal and formal sectors co-existing. The informal sector (consisting offamily firms) co-exists with the modern sector of urban labour markets.&#160; The informal sector is non-compliant toregulation, while the modern sector is variably (more or less) compliant.Though labour market segmentation is a central theme of many theories ofeconomic development, in practice there are interlinkages between the formaland informal sectors, with workers transiting in and out of the rural labourmarket to the informal labour market and from the latter to the formal labourmarket. For those notinvolved with agriculture, the family firmoften replaces the family farmasthe dominant institution for determining jointly production, employment andconsumption decisions. In the short term, the family plans its output inrelation to the underlying level of economic activity. The family is a netdemander of labour if its labour endowment is insufficient to meet its outputtarget. Otherwise, the family firm is a net supplier of work. Whether thefamily can meet its labour demand is a complex issue related to its generallevel of assets, its demographic composition, and the labour intensity of thetechnology it adopts in its production process.In turn, thismeans that depending on the regime the family is confronted to, its output,labour, and consumption responses to production price and wage changes aredifferent. This makes the design of tax and benefit systems in developingcountries a very complex and challenging task. An equallyimportant determinant of labour supply and demand decisions is the genderstructure of the household. The presence of a largeshare of surviving female children is for instance associated with wealthreduction, and increased labour supply. In the longerterm, the family attempts to adjust its demographic structure in order toorganize its production process more efficiently, in order to smoothconsumption and diversify its exposure to other risks (disease and mortality)to a larger extent. The change in family composition is achieved via a mix offertility decisions, marriage choice and migration.The complexstructure of developing country labour markets and the role of the family as aninstitution of production and distribution of output leads to many otherchallenging questions from a policy perspective. It also leads us to questionwhether identical quick-fix policies can be equally effective when applied say inthe tropics, the Sahara and the Andes.Consider for instance the scope labour unions can have in bargaining for better wages and higher safety standards at work. The effect of unions on employment is well understood when employment relations function as long term contracts, as is the case in a majority of developed countries. But the reality of developing country labour markets is that daily, seasonal and long term contracts co-exist for various reasons related to the nature of economic activity. We mentionanother example: the development of insurance markets. Their main role is tointroduce tools to spread risks more efficiently across individuals and firms.But the effect of the introduction of insurance markets is likely to have farreaching consequences on the way households time and choose their marriagedecisions, and also on the need and timing of their migration decisions.A goodunderstanding of the complex issues that govern local production, employmentand consumption decisions is thus needed in order to assess the likely impactof the introduction of a specific policy that has been highly recommended bysay, some consultant, expert or other in Washington or Paris. Labour marketsare not like cars: they vary all over the world, and in many subtle ways. And,as a matter of fact, just as societies have a right to write their ownconstitutions in order to meet their specific aspirations of freedom and socialjustice, economic policy should be articulated in developing countries througha participatory process that helps to meet these higher values its people areaspiring to.&#160; Ramses Abul Naga