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Earnings inequality and the informal economy: evidence from Serbia

Author

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  • Peter Sanfey

    (European Bank for Reconstruction and Development)

  • Gorana Krstic

    (University of Belgrade)

Abstract

We analyse the extent and evolution of informality and inequality in the Serbian labour market between 2002 and 2007, using data from the Living Standard Measurement Surveys (LSMS). Two surprising results emerge. First, the level of informal employment has risen significantly over the period, despite strong economic growth and the introduction of a range of market-oriented reforms. Second, the level of inequality in earnings seems to have remained more or less constant over the period, in contrast to the experience of other countries at a similar stage of transition. We show that informal employees earn significantly less than those in the formal sector, controlling for a range of other variables, and informality plays an increasingly important role in explaining earnings inequality.

Suggested Citation

  • Peter Sanfey & Gorana Krstic, 2010. "Earnings inequality and the informal economy: evidence from Serbia," Working Papers 114, European Bank for Reconstruction and Development, Office of the Chief Economist.
    • Handle: RePEc:ebd:wpaper:114
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    More about this item

    Keywords

    Informal economy; inequality; Serbia;
    All these keywords.

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J4 - Labor and Demographic Economics - - Particular Labor Markets
    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies

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