Earning structure and heterogeneity of the labor market: Evidence from DR Congo

Using a unique broad individual, household and expenditure survey data on the DRC, initial descriptive statistics highlight five different sectors on the labor market with two "higher-paid" that are completely formal and two "lower-paid" that are largely informal. Based on a linear regression result, we report a significant heterogeneity across them when it comes to earnings. With an unconditional quantile regression methodology corrected for selectivity bias we show that, though the effect of education on earnings provides a clear support to the human capital theory, basic education has no significant impact on earnings in higher-paid sectors. Likewise, tertiary education matters for earnings in lower-paid sectors as well. We then decompose the earning gap across sectors and show that workers of the lower-paid sectors earn less not only because they are less skill endowed but also because they earn lower returns on such skills. However, when higher-paid and lower paid sectors are concerned, the coefficient effect at the upper end of the distribution is negative. Implying that the labor market provides an "informal employment earning premium" to some workers of the lower-paid sectors whose, given their characteristics, wouldn't do better in the higher-paid sectors.