Economic mobility can mean different things in different contexts. In developing countries, work income is the most important aspect of personal and household income, therefore most economic mobility research focus on labour market. In the textbooks, mobility implies earning more money. From a dual labour market framework, generally, mobility involves moving from the rural to the urban sector or from the non-wage sector to the wage sector. The non-wage sector is not heterogeneous; it is divided on the basis of production process (either a worker is added to an existing process or must create a new one) and income determination that is whether income are considered marginal product (e.g. non-agricultural self-employment) or average product (e.g. family agriculture). As a result, mobility can also apply to transitions in the non-wage sector. Barriers to labor mobility across sectors would plainly be a symptom of unequal development as labor markets in developing nations are multi-sectoral hence making mobility an essential measure of economic progress.

The Nigerian labour market is remarkably divided into the rural sector (which consists of self-employed and unpaid family workers), informal urban sector (comprises of small-scale private businesses, artisans and other street vendors) and formal urban sector (made up of large scale private and public enterprises) that require some degree of regulatory and other stringent control rules (Ogwumike et al., 2006).

The two-sector models dominate literature on job choice and mobility where individuals select between wage employment and self-employment, and employees generally transit from the former to the latter. (Buera, 2009; Jovanovic, 2009; Lusardi & Hurst, 2005). These models are adequate when studying high-income countries, but they are not for developing economies. The assumption that markets always clear in equilibrium and workers can find wage employment anytime does not provide sufficient analytical insights of the labour market. This is because in low-income countries, the bulk of self-employment is made up of informal side hustles carried out by people who are unable to find (formal) wage work.

  In Nigeria, it is argued that the informal sector is merely a holding ground for people awaiting entry into formal sector; as such the informal sector is a transitional phase or whether it is here to stay and should be promoted as a major source of employment and income for the urban labour force. In the word of informal sector involuntary workers would prefer formal jobs if one was available, these differences have important policy implications. The two-sector model, for example, considers financial constraints to be the primary restraint to self-employment and labor productivity increases. A worker in wage employment would be hesitant to start their own business not just because of the danger of temporary income loss if it fails, but also because of the risk of permanent wage loss connected with the uncertainty of returning to wage employment (Kihlstrom & Laffont, 1979). On the other hand, workers who began their careers as self-employed may have trouble finding wage job if their skills are not marketable in the wage employment sector due to significant inter-sectoral technological gaps.