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Is There an Informal Employment Wage Penalty in Egypt

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  • Aysit Tansel

    () (Department of Economics, Middle East Technical University, IZA, and ERF Cairo)

  • Halil Ibrahim Keskin

    () (Department of Econometrics, Gazi Unversity)

  • Zeynel Abidin Ozdemir

    () (Department of Economics, Gazi Unversity, ERF Cairo)

Abstract

This paper considers the private sector wage earners in Egypt and examine their wage distribution during 1998-2012 using Egyptian Labor Market Panel Survey. We first estimate Mincer wage equations both at the mean and at different quantiles of the wage distribution taking into account observable characteristics. Then we make use of the panel feature of the data and estimate models taking into account unobservable characteristics. We also consider the possibility of nonlinearity in covariate effects and estimate a variant of matching models. In all cases we find a persistent informal wage penalty in the face of extensive sensitivity checks. It is smaller when unobserved heterogeneity is taken into account and larger at the top than at the bottom of the conditional wage distribution. We also examine the informal wage penalty over time during the study period and in different groups according to experience and education. The informal wage penalty has increased recently over time and is larger for the better educated but smaller for the more experienced.

Suggested Citation

  • Aysit Tansel & Halil Ibrahim Keskin & Zeynel Abidin Ozdemir, 2015. "Is There an Informal Employment Wage Penalty in Egypt," Koç University-TUSIAD Economic Research Forum Working Papers 1519, Koc University-TUSIAD Economic Research Forum.
  • Handle: RePEc:koc:wpaper:1519
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    References listed on IDEAS

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    Cited by:

    1. Ahmed Elsayed & Jackline Wahba, 2016. "Informalization Dynamics and Gains: Why Want a Job Contract?," Working Papers 1001, Economic Research Forum, revised May 2016.
    2. Gustavo A. García, 2017. "Labor Informality: Choice or Sign of Segmentation? A Quantile Regression Approach at the Regional Level for Colombia," Review of Development Economics, Wiley Blackwell, vol. 21(4), pages 985-1017, November.

    More about this item

    Keywords

    Formal and informal wage gap; Formal and informal employment; Panel data; Egypt.;

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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