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Wage differentials in Mexico's urban labor market

  • Carlo Alcaraz

    ()

    (Banco de México)

  • Daniel Chiquiar

    ()

    (Banco de México)

  • Manuel Ramos-Francia

    ()

    (Banco de México)

We estimate wage differentials across different segments of the Mexican urban labor market. We use a panel sample of individuals which allows us to control for workers' observable and non-observable characteristics, by focusing on wage changes reported by individuals who move from one sector to another. The results suggest that the wage differential between the formal and informal sectors is positive and significant, and larger than the differential between industry and services. While we cannot distinguish formally between different hypotheses that could explain the existence of these differentials, our results seem to suggest that the main distortions in the Mexican labor market appear to be related more to labor regulations that affect the allocation of labor between the formal and informal sectors, than to differences in intrinsic characteristics of the production processes in industry and services.

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File URL: http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I3-P224.pdf
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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 31 (2011)
Issue (Month): 3 ()
Pages: 2500-2508

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Handle: RePEc:ebl:ecbull:eb-11-00035
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  1. Maloney, William F., 2004. "Informality Revisited," World Development, Elsevier, vol. 32(7), pages 1159-1178, July.
  2. Gasparini Leonardo & Leonardo Tornaroli, 2009. "Labor Informality in Latin America and the Caribbean: Patterns and Trends from Household Survey Microdata," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE.
  3. 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.
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