IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Are Informal Workers Compensated for the Lack of Fringe Benefits? Free Health Care as an Instrument for Formality

  • Laura Juarez

    ()

    (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM))

This paper estimates the e¤ect of having a job covered by social security, on the wages of female salaried workers. I overcome the heterogeneity bias that typically contaminates estimates by using the exogenous availability of free health care and prescription drugs implemented in 2001 in the part of Mexico City that belongs to Distrito Federal (DF). This program provides valid instruments because health care is a substantial component of the bene?ts provided by social security, so the availability of alternative free health care should decrease the incentive to contribute to the system. In addition, eligibility for this program is not correlated with individual unobserved characteristics that a¤ect either wages or the choice of sector. My results show that being a DF resident after free health care was implemented has a negative an signi?cant e¤ect on the probability that a female salaried worker has social security in her current job. Regarding wages, not controlling for the endogeneity of formality on the wage regression gives rise to a positive formal premium as in previous studies for both developed and developing countries. In contrast, my instrumental variables results show that female salaried workers in the formal sector earn between 16 to 23 percent less than female workers in informal jobs. These results show that workers who receive higher fringe bene?ts are paid a lower wage, which supports the compensating di¤erential theory. In the Mexican context, it would also suggest that informal salaried workers are not necessarily worse o¤than their counterparts in the formal sector.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://ftp.itam.mx/pub/academico/inves/laura/08-04.pdf
Download Restriction: no

Paper provided by Centro de Investigacion Economica, ITAM in its series Working Papers with number 0804.

as
in new window

Length: 17 pages
Date of creation: Sep 2008
Date of revision:
Handle: RePEc:cie:wpaper:0804
Contact details of provider: Postal: Camino a Sta. Teresa 930, Mexico, D.F. 10700
Phone: +525 628 4197
Fax: +525 628 4058
Web page: http://cie.itam.mx/
Email:


More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. Charles Brown & James L. Medoff, 1989. "The Employer Size-Wage Effect," NBER Working Papers 2870, National Bureau of Economic Research, Inc.
  2. Gong, Xiaodong & van Soest, Arthur, 2001. "Wage Differentials and Mobility in the Urban Labor Market: A Panel Data Analysis for Mexico," IZA Discussion Papers 329, Institute for the Study of Labor (IZA).
  3. Douglas Marcouiller, S.J. & Veronica Ruiz de Castilla & Christopher Woodruff, 1995. "Formal Measures of the Informal Sector Wage Gap in Mexico, El Salvador, and Peru," Boston College Working Papers in Economics 294., Boston College Department of Economics.
  4. Christoph Schmidt & Klaus Zimmerman, 1990. "Work Characteristics, Firm Size and Wages," Working Papers 644, Princeton University, Department of Economics, Industrial Relations Section..
  5. Pratap, Sangeeta & Quintin, Erwan, 2006. "Are labor markets segmented in developing countries? A semiparametric approach," European Economic Review, Elsevier, vol. 50(7), pages 1817-1841, October.
  6. Janet Currie & Brigitte C. Madrian, 1998. "Health, Health Insurance and the Labor Market," JCPR Working Papers 27, Northwestern University/University of Chicago Joint Center for Poverty Research.
  7. Rebitzer, James B & Robinson, Michael D, 1991. "Employer Size and Dual Labor Markets," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 710-15, November.
  8. 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.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cie:wpaper:0804. 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: (Diego Dominguez)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.