The informal sector wage gap : new evidence using quantile estimations on panel data

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Title: The informal sector wage gap : new evidence using quantile estimations on panel data
Authors: Bargain, Olivier
Kwenda, Prudence
Permanent link: http://hdl.handle.net/10197/2601
Date: May-2009
Abstract: This paper provides new evidence on the wage gap between informal and formal salary workers in South Africa, Brazil and Mexico. We use rich datasets that allow us to de…fine informality in a relatively comparable fashion across countries. We compute precise wage differentials by accounting for taxes paid in the formal sector. For each country, we analyze how the sectoral wage gap varies within groups, between groups and over time. To account for unobserved heterogeneity, we use large (unbalanced) panels to estimate …fixed effects models at the mean and at different points of the wage distribution. We fi…nd that unobserved heterogeneity explains a large part of the (conditional) wage gap. The remaining informal sector wage penalty is large in the lower part of the distribution but almost disappears at the top. The penalty primarily concerns young workers and is found to be procyclical. We carefully investigate the robustness of these results and discuss their policy implications as well as regularities across countries.
Funding Details: Not applicable
Type of material: Working Paper
Publisher: University College Dublin. School of Economics
Series/Report no.: UCD Centre for Economic Research Working Paper Series; WP 09 05
Keywords: Wage gapInformal sectorQuantile regression,Fi…xed effects modelSelection
Subject LCSH: Wage differentials
Informal sector (Economics)
Regression analysis
Other versions: http://www.ucd.ie/t4cms/wp09.05.pdf
Language: en
Status of Item: Not peer reviewed
metadata.dc.date.available: 2010-11-25T16:59:24Z
Appears in Collections:Economics Working Papers & Policy Papers

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