Formal Measures of the Informal-Sector Wage Gap in Mexico, El Salvador, and Peru
Using comparable micro-level data from three countries, we ask what type of person works in the informal sector and whether informal workers earn lower wages than observationally equivalent workers in the formal sector. The characteristics of informal workers are similar across countries. Surprisingly, when we control for these personal characteristics, we find a significant wage premium associated with formal employment in El Salvador and Peru but a premium associated with work in the informal sector in Mexico. A model of endogenous selection offers little help in explaining the differences in wage patterns. The research casts doubt on the received wisdom that the informal sector, always and everywhere, is a poorly-paid but easily- entered refuge for those who have no other employment opportunities.
(This abstract was borrowed from another version of this item.)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Moock, P. & Musgrove, P. & Stelcner, M., 1990. "Education And Earnings In Peru'S Informal Nonfarm Family Enterprises," Papers 64, World Bank - Living Standards Measurement.
- Brown, Charles & Medoff, James, 1989.
"The Employer Size-Wage Effect,"
Journal of Political Economy,
University of Chicago Press, vol. 97(5), pages 1027-59, October.
- repec:cdl:ucsbec:23-94 is not listed on IDEAS
- Gindling, T H, 1991. "Labor Market Segmentation and the Determination of Wages in the Public, Private-Formal, and Informal Sectors in San Jose, Costa Rica," Economic Development and Cultural Change, University of Chicago Press, vol. 39(3), pages 584-605, April.
- Dickens, William T & Lang, Kevin, 1985.
"A Test of Dual Labor Market Theory,"
American Economic Review,
American Economic Association, vol. 75(4), pages 792-805, September.
- King, E.M., 1990. "Does Education Pay In The Labor Market?: The Labor Force Participation, Occupation, And Earnings Of Peruvian Women," Papers 67, World Bank - Living Standards Measurement.
- Oaxaca, Ronald L. & Ransom, Michael R., 1994. "On discrimination and the decomposition of wage differentials," Journal of Econometrics, Elsevier, vol. 61(1), pages 5-21, March.
- Tokman, Victor E., 1989. "Policies for a heterogeneous informal sector in Latin America," World Development, Elsevier, vol. 17(7), pages 1067-1076, July.
- Mazumdar, Dipak, 1983. "Segmented Labor Markets in LDCs," American Economic Review, American Economic Association, vol. 73(2), pages 254-59, May.
- Fields, Gary S., 1975. "Rural-urban migration, urban unemployment and underemployment, and job-search activity in LDCs," Journal of Development Economics, Elsevier, vol. 2(2), pages 165-187, June.
- James J. Heckman & V. Joseph Hotz, 1986. "An Investigation of the Labor Market Earnings of Panamanian Males Evaluating the Sources of Inequality," Journal of Human Resources, University of Wisconsin Press, vol. 21(4), pages 507-542.
- Mezzera J, 1990. "Informal sector, as in PREALC," ILO Working Papers 278800, International Labour Organization.
- Magnac, Th, 1991. "Segmented or Competitive Labor Markets," Econometrica, Econometric Society, vol. 59(1), pages 165-87, January.
- Irwin Bernhardt, 1994. "Comparative Advantage in Self-Employment and Paid Work," Canadian Journal of Economics, Canadian Economics Association, vol. 27(2), pages 273-89, May.
- Telles, Edward E, 1993. "Urban Labor Market Segmentation and Income in Brazil," Economic Development and Cultural Change, University of Chicago Press, vol. 41(2), pages 231-49, January.
- Marcouiller, Douglas & Young, Leslie, 1995. "The Black Hole of Graft: The Predatory State and the Informal Economy," American Economic Review, American Economic Association, vol. 85(3), pages 630-46, June.
When requesting a correction, please mention this item's handle: RePEc:ucp:ecdecc:v:45:y:1997:i:2:p:367-92. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division)
If references are entirely missing, you can add them using this form.