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Informality Sectoral Selection and Earnings in Uruguay

  • Marisa Bucheli

    (Universidad de la República, Uruguay)

  • Rodrigo Ceni

    (Universidad de la República, Uruguay)

In this paper we define an informal worker as one who is not contributing to the social security system. We analyze the likelihood of being an informal worker, and we estimate the differentials in earnings between sectors using the OLS estimation and a switching regression model. We find that formality is more likely among the better-educated, and among men, those residing in the capital city, and heads of households. In addition, we find that according to five different proxies of the average gap for salaried workers and several sub-samples, earnings are higher in the formal than in the informal sector for all the samples.

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Article provided by El Colegio de México, Centro de Estudios Económicos in its journal Estudios Económicos.

Volume (Year): 25 (2010)
Issue (Month): 2 ()
Pages: 281-307

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Handle: RePEc:emx:esteco:v:25:y:2010:i:2:p:281-307
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  1. 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.
  2. Sangeeta Pratap & Erwan Quintin, 2001. "Are labor markets segmented in Argentina? a semiparametric approach," Center for Latin America Working Papers 0701, Federal Reserve Bank of Dallas.
  3. 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.
  4. Alvaro Forteza, 2003. "Seguridad social y competencia política," Documentos de Trabajo (working papers) 0403, Department of Economics - dECON.
  5. 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.
  6. Friedrich Schneider & Dominik Enste, 2000. "Shadow Economies Around the World; Size, Causes, and Consequences," IMF Working Papers 00/26, International Monetary Fund.
  7. Paula Auerbach & María Eugenia Genoni & Carmen Pagés-Serra, 2005. "Social Security Coverage and the Labor Market in Developing Countries," IDB Publications (Working Papers) 4130, Inter-American Development Bank.
  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. 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.
  10. 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.
  11. Verónica Amarante, 2002. "Salarios públicos y privados : los diferentes segmentos del mercado laboral 1991-2000," Documentos de Trabajo (working papers) 02-04, Instituto de Economía - IECON.
  12. 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.
  13. 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).
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