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Are labor markets segmented in Argentina? a semiparametric approach

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Sangeeta Pratap
Erwan Quintin

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Abstract

A large part of the theoretical literature on informal economic activities in developing nations is founded on the assumption that labor markets are segmented. In this paper, we evaluate this premise with data from Argentina's permanent household survey for the 1993-1995 time period. We consider various definitions of informality based on the benefits mandated by Argentina's labor laws. We find that average wages are significantly higher in the formal sector than in the informal sector. We proceed to use a matching estimator to correct for the possible endogeneity of employment outcomes. The wage premium becomes much smaller when one controls for individual characteristics such as age, education and gender, and establishment characteristics, notably size. We then make use to the panel structure of our data to compute a difference-indifference estimate of the formal wage premium. This estimate does not significantly differ from zero, suggesting that unobserved ability accounts for the remaining wage differences across sectors. We conclude that the assumption that labor markets are competitive in Argentina cannot be rejected. The paper also provides a list of facts with which a satisfactory theory of informality for Latin America should be consistent. ; Economic Research Working Paper 0110

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Paper provided by Federal Reserve Bank of Dallas in its series Center for Latin America Working Papers with number 0701.

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Date of creation: 2001
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Handle: RePEc:fip:feddcl:0701

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Keywords: Argentina ; Financial crises - Latin America ; Labor market ; Employment (Economic theory);

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  7. Tansel, A., 1999. "Formal Versus Informal Sector Choice of Wage Earners and their Wages in Turkey," Papers 9927, Economic Research Forum.
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  9. Rajeev H. Dehejia & Sadek Wahba, 2002. "Propensity score matching methods for non-experimental causal studies," Discussion Papers 0102-14, Columbia University, Department of Economics. [Downloadable!]
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  10. Loayza, Norman V., 1996. "The economics of the informal sector: a simple model and some empirical evidence from Latin America," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 45(1), pages 129-162, December. [Downloadable!] (restricted)
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  13. Heckman, James J & Ichimura, Hidehiko & Todd, Petra E, 1997. "Matching as an Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Blackwell Publishing, vol. 64(4), pages 605-54, October. [Downloadable!] (restricted)
  14. Maloney, William F, 1999. "Does Informality Imply Segmentation in Urban Labor Markets? Evidence from Sectoral Transitions in Mexico," World Bank Economic Review, Oxford University Press, vol. 13(2), pages 275-302, May.
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  18. Gong, Xiaodong & van Soest, Arthur & Villagomez, Elizabeth, 2000. "Mobility in the Urban Labor Market: A Panel Data Analysis for Mexico," IZA Discussion Papers 213, Institute for the Study of Labor (IZA). [Downloadable!]
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  19. Fields, Gary S., 1975. "Rural-urban migration, urban unemployment and underemployment, and job-search activity in LDCs," Journal of Development Economics, Elsevier, vol. 2(2), pages 165-187, June. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Eliane Badaoui & Eric Strobl & Frank Walsh, 2007. "Is There An Informal Employment Wage Penalty? Evidence from South Africa," IZA Discussion Papers 3151, Institute for the Study of Labor (IZA). [Downloadable!]
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  2. Ñopo, Hugo, 2004. "Matching as a Tool to Decompose Wage Gaps," IZA Discussion Papers 981, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  3. Marisa Bucheli & Rodrigo Ceni, 2007. "Informality: Sectoral Selection and Earnings in Uruguay," Documentos de Trabajo (working papers) 2007, Department of Economics - dECON. [Downloadable!]
  4. Eliane Badaoui & Eric Strobl & Frank Walsh, 2007. "The Formal Sector Wage Premium and Firm Size," IZA Discussion Papers 3145, Institute for the Study of Labor (IZA). [Downloadable!]
  5. Pedro Amaral & Erwan Quintin, 2004. "The implications of capital-skill complementarity in economies with large informal sectors," Center for Latin America Working Papers 0404, Federal Reserve Bank of Dallas. [Downloadable!]
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  6. Lall, Somik V. & Selod, Harris & Shalizi, Zmarak, 2006. "Rural-urban migration in developing countries : a survey of theoretical predictions and empirical findings," Policy Research Working Paper Series 3915, The World Bank. [Downloadable!]
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