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Informality: Sectoral Selection and Earnings in Uruguay

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Author Info

  • Marisa Bucheli

    ()
    (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)

  • Rodrigo Ceni

    ()
    (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)

Abstract

In this paper we define informal workers as those who are not contributing to the social security system. We analyse the likelihood of being informal and we estimate the differentials in earnings between sectors using both the OLS estimation and a switching regression model. We assess the premium for being formal by predicting five different proxies of the average gap. We use the crosssection data reported in a 2005 household survey. We find that formality is more likely among the better-educated, women, people residing in the capital city, heads of households and full-time workers. In addition, we find that according to the five measures of the gap, earnings are higher in the formal than in the informal sector.

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Bibliographic Info

Paper provided by Department of Economics - dECON in its series Documentos de Trabajo (working papers) with number 2007.

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Length: 27 pages
Date of creation: Nov 2007
Date of revision:
Handle: RePEc:ude:wpaper:2007

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Keywords: informal sector; wage differential;

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References

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  1. Marcouiller, Douglas & Ruiz de Castilla, Veronica & Woodruff, Christopher, 1997. "Formal Measures of the Informal-Sector Wage Gap in Mexico, El Salvador, and Peru," Economic Development and Cultural Change, University of Chicago Press, vol. 45(2), pages 367-92, January.
  2. Alvaro Forteza, 2003. "Seguridad social y competencia política," Documentos de Trabajo (working papers) 0403, Department of Economics - dECON.
  3. Verónica Amarante, 2002. "Salarios públicos y privados : los diferentes segmentos del mercado laboral 1991-2000," Documentos de Trabajo (working papers) 02-04, Instituto de Economia - IECON.
  4. Auerbach, Paula & Genoni, Maria Eugenia & Pagés, Carmen, 2007. "Social Security Coverage and the Labor Market in Developing Countries," IZA Discussion Papers 2979, Institute for the Study of Labor (IZA).
  5. Michael J. Pisani & José A. Pagán, 2004. "Sectoral Selection and Informality: a Nicaraguan Case Study," Review of Development Economics, Wiley Blackwell, vol. 8(4), pages 541-556, November.
  6. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
  7. Maddala, G.S., 1986. "Disequilibrium, self-selection, and switching models," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 3, chapter 28, pages 1633-1688 Elsevier.
  8. Jaime Saavedra & Alberto Chong, 1999. "Structural reform, institutions and earnings: Evidence from the formal and informal sectors in urban Peru," Journal of Development Studies, Taylor & Francis Journals, vol. 35(4), pages 95-116.
  9. Marisa Bucheli & Alvaro Forteza & Ianina Rossi, 2006. "Seguridad social y género en Uruguay: un análisis de las diferencias de acceso a la jubilación," Documentos de Trabajo (working papers) 0406, Department of Economics - dECON.
  10. Maloney, William F, 1999. "Does Informality Imply Segmentation in Urban Labor Markets? Evidence from Sectoral Transitions in Mexico," World Bank Economic Review, World Bank Group, vol. 13(2), pages 275-302, May.
  11. Friedrich Schneider & Dominik Enste, 2000. "Shadow Economies Around the World - Size, Causes, and Consequences," IMF Working Papers 00/26, International Monetary Fund.
  12. Paula Auerbach & María Eugenia Genoni & Carmen Pagés-Serra, 2005. "Social Security Coverage and the Labor Market in Developing Countries," IDB Publications 4130, Inter-American Development Bank.
  13. Sageeta Pratap & Erwan Quintin, 2002. "Are Labor Markets Segmented in Argentina? A Semiparametric Approach," Working Papers 0202, Centro de Investigacion Economica, ITAM.
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Cited by:
  1. Johan Sandberg, 2012. "Conditional Cash Transfers and Social Mobility: The Role of Asymmetric Structures and Segmentation Processes," Development and Change, International Institute of Social Studies, vol. 43(6), pages 1337-1359, November.

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