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The price of fringe benefits when formal and informal labor markets coexist

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  • David Argente
  • Jorge García

Abstract

We use the Mexican labor market structure to price the set of fringe benefits that household heads receive when formally employed. We exploit longitudinal, nationally-representative information on household heads who are formal, informal, or switch status at least once in our data. Using monthly labor income and an efficient markets hypothesis, we identify a standard linear model which accounts for time-variant household heads’ characteristics and household level and time fixed effects. Under the usual strict-exogeneity assumption, we find that the price of fringe benefits is approximately 7.9% of the average monthly labor income of informal workers, or $217 USD. JEL Classification:D4; J3; J4 Copyright Argente and García; licensee Springer. 2015

Suggested Citation

  • David Argente & Jorge García, 2015. "The price of fringe benefits when formal and informal labor markets coexist," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-12, December.
    • Handle: RePEc:spr:izalbr:v:4:y:2015:i:1:p:1-12:10.1186/s40172-014-0014-0
    DOI: 10.1186/s40172-014-0014-0
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    References listed on IDEAS

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    1. Azuara, Oliver & Marinescu, Ioana, 2013. "Informality and the expansion of social protection programs: Evidence from Mexico," Journal of Health Economics, Elsevier, vol. 32(5), pages 938-950.
    2. Ulyssea, Gabriel, 2010. "Regulation of entry, labor market institutions and the informal sector," Journal of Development Economics, Elsevier, vol. 91(1), pages 87-99, January.
    3. Heckman, James J, 1976. "A Life-Cycle Model of Earnings, Learning, and Consumption," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 11-44, August.
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    Cited by:

    1. Dang, Thang, 2017. "Education as Protection? The Effect of Schooling on Non-Wage Compensation in a Developing Country," MPRA Paper 79223, University Library of Munich, Germany.

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    More about this item

    Keywords

    Dual labor market; Fringe benefits; Informal labor market;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J4 - Labor and Demographic Economics - - Particular Labor Markets

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