The formal sector wage premium and firm size

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Title: The formal sector wage premium and firm size
Authors: El Badaoui, Eliane
Strobl, Eric
Walsh, Frank
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Date: Jan-2010
Abstract: We show theoretically that when larger firms pay higher wages and are more likely to be caught defaulting on labor taxes, then large-high wage firms will be in the formal and small-low wage firms will be in the informal sector. The formal sector wage premium is thus just a firm size wage differential. Using data from Ecuador we illustrate that firm size is indeed the key variable determining whether a formal sector premium exists.
Type of material: Journal Article
Publisher: Elsevier
Journal: Journal of Development Economics
Volume: 91
Issue: 1
Start page: 37
End page: 47
Copyright (published version): 2009 Elsevier
Keywords: Formal sector wage premiumFirm sizeTrinidad-and-tobagoLabor-marketDeveloping-countriesInformal sectorPropensity scoreEmployer sizeUnemploymentDifferentialsConsequencesTaxation
DOI: 10.1016/j.jdeveco.2009.03.007
Language: en
Status of Item: Peer reviewed
Appears in Collections:Economics Research Collection

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