Comparative Advantage, Segmentation and Informal Earnings: A Marginal Treatment Effects Approach
AbstractThis paper employs recently developed econometric models of marginal treatment effects to analyze the relevance of labor market comparative advantage and segmentation in the participation and earnings performance of workers in formal and informal jobs in Argentina. A novel household data set on informality and self-employment and information on labor inspections targeting informal work was collected for this purpose. We account for endogeneity and selectivity issues in our estimations. Our results offer evidence for both comparative advantage and segmentation. No significant differences between the earnings of formal salaried workers and the self-employed are found, once accounted for positive selection bias into formal work. This is consistent with labor market comparative advantage considerations. On the contrary, informal salaried employment carries significant earnings penalties, alongside negative selection bias and modest positive sorting. These results are more consistent with segmentation.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3916.
Length: 64 pages
Date of creation: Dec 2008
Date of revision:
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Find related papers by JEL classification:
- C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-01-31 (All new papers)
- NEP-ENT-2009-01-31 (Entrepreneurship)
- NEP-LAB-2009-01-31 (Labour Economics)
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