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Sectoral Selection and Informality: a Nicaraguan Case Study

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  • Michael J. Pisani
  • José A. Pagán

Abstract

Using microdata from the 1998 and 1993 Nicaraguan Living Standards Measurement Survey, this paper analyzes the relative size and attractiveness of formal and informal sector employment. Switching regression models of the formal/informal sector employment choice indicate that education across years and gender are the primary determinants of formal sector participation. Furthermore, the formal sector is characterized by positive selection. The results for the informal sector are less definitive, but are also suggestive of positive selection. These findings imply that the informal and formal sectors in Nicaragua contribute positively to the overall economy by attracting those individuals best suited for (in)formal sector employment.

Suggested Citation

  • 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.
    • Handle: RePEc:bla:rdevec:v:8:y:2004:i:4:p:541-556
    DOI: 10.1111/j.1467-9361.2004.00251.x
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Li, Bingqin & Peng, Huamin, 2006. "The social protection of rural workers in the construction industry in urban China," LSE Research Online Documents on Economics 6226, London School of Economics and Political Science, LSE Library.
    2. Lemos, Sara, 2009. "Minimum wage effects in a developing country," Labour Economics, Elsevier, vol. 16(2), pages 224-237, April.
    3. Dario Pozzoli & Marco Ranzani, 2010. "Participation and sector selection in Nicaragua," Journal of International Development, John Wiley & Sons, Ltd., vol. 22(5), pages 591-610.
    4. Marisa Bucheli & Rodrigo Ceni, 2010. "Informality Sectoral Selection and Earnings in Uruguay," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 25(2), pages 281-307.
    5. Mandelman, Federico S. & Montes-Rojas, Gabriel V., 2009. "Is Self-employment and Micro-entrepreneurship a Desired Outcome?," World Development, Elsevier, vol. 37(12), pages 1914-1925, December.
    6. Ceyhun Elgin & Muhammed Burak Sezgin, 2017. "Sectoral Estimates of Informality: A New Method and Application for the Turkish Economy," The Developing Economies, Institute of Developing Economies, vol. 55(4), pages 261-289, December.
    7. Camilo Mondragón-Vélez & Ximena Peña, 2010. "Business Ownership and Self-Employment in Developing Economies: The Colombian Case," NBER Chapters, in: International Differences in Entrepreneurship, pages 89-127, National Bureau of Economic Research, Inc.
    8. Erik Jonasson, 2011. "Informal Employment and the Role of Regional Governance," Review of Development Economics, Wiley Blackwell, vol. 15(3), pages 429-441, August.
    9. Antonio Baez-Morales, 2015. "“Determinants of Micro Firm Informality in Mexican States 2008-2012”," AQR Working Papers 201509, University of Barcelona, Regional Quantitative Analysis Group, revised Apr 2015.
    10. Anita Staneva & G Arabsheibani, 2014. "Is there an informal employment wage premium? Evidence from Tajikistan," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-24, December.
    11. Perotti, Valeria & Sánchez Puerta, Maria Laura, 2009. "Personal Opinions about the Social Security System and Informal Employment : Evidence from Bulgaria," Social Protection Discussion Papers and Notes 89563, The World Bank.
    12. Henley, Andrew & Arabsheibani, G. Reza & Carneiro, Francisco G., 2009. "On Defining and Measuring the Informal Sector: Evidence from Brazil," World Development, Elsevier, vol. 37(5), pages 992-1003, May.
    13. Bingqin Li & Huamin Peng, 2006. "The Social Protection of Rural Workers in the Construction Industry in Urban China," CASE Papers case113, Centre for Analysis of Social Exclusion, LSE.

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