EN       DE
 
  Home   Search  
IDSC
 
IZA World of Labor
  Site Map   Contact   Member Login
   

IZA

Logo
The Informal Sector Wage Gap: New Evidence Using Quantile Estimations on Panel Data
by Olivier Bargain, Prudence Kwenda
(July 2009)
forthcoming in: Economic Development and Cultural Change

Abstract:
Most emerging economies are characterized by the presence of informal salary employment, often argued to be caused by stringent labor market regulation and to result in wage penalties compared to the formal sector. The actual picture is certainly more complex. In this paper, we use rich datasets for South Africa, Brazil and Mexico that allow us to define informality in a relatively comparable fashion across countries and to estimate precisely the (conditional) wage gap between informal and formal salary workers. We account for taxes paid in formal employment as well as for time-invariant unobserved heterogeneity, using large (unbalanced) panels and fixed effects quantile regression. Importantly, all three countries show a similar pattern once workers' heterogeneity is accounted for: informal sector wage penalties are significant in the lower part of the distribution but tend to disappear at the top. We provide an extensive robustness analysis and discuss the policy implications of these results.
Text: See Discussion Paper No. 4286  




 

© IZA  Impressum  Last updated: 2014-09-24  webmaster@iza.org    |   Print View    |    Privacy Policy