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Returns to Qualification in Informal Employment: A Study of Urban Youth in Egypt

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  • Frost, Jon

Abstract

Informal employment is a reality for roughly two-thirds of economically active youth in urban Egypt, and it has been argued to be correlated with poverty, poor working conditions, and few opportunities for advancement. This essay analyzes whether informal employment rewards job qualification measures, using survey data from 2006 and a Blinder-Oaxaca wage decomposition. After creating a taxonomy of formal, para-formal, and informal modes of qualification, it is shown that formal public and formal private jobs tend to reward those with formal qualifications, while informal employment tends to reward informal qualification mechanisms. The notion that informal employment does not reward qualification is disputed. Furthermore, there are large wage premia based on formality of employment, region, and gender. The results can be explained by analyzing the formality decision and the qualification decisions of youth. This suggests an alterative explanation for “dualistic” outcomes in youth labor markets.

Suggested Citation

  • Frost, Jon, 2008. "Returns to Qualification in Informal Employment: A Study of Urban Youth in Egypt," MPRA Paper 12599, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:12599
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    File URL: https://mpra.ub.uni-muenchen.de/12599/1/MPRA_paper_12599.pdf
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    References listed on IDEAS

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    1. Esfahani, Hadi S & Salehi-Isfahani, Djavad, 1989. "Effort Observability and Worker Productivity: Towards an Explanation of Economic Dualism," Economic Journal, Royal Economic Society, vol. 99(397), pages 818-836, September.
    2. Almeida, Rita K. & Carneiro, Pedro, 2005. "Enforcement of Regulation, Informal Labor and Firm Performance," IZA Discussion Papers 1759, Institute for the Study of Labor (IZA).
    3. Currie, Janet & Madrian, Brigitte C., 1999. "Health, health insurance and the labor market," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 50, pages 3309-3416 Elsevier.
    4. Mohieldin, Mahmoud S & Wright, Peter W, 2000. "Formal and Informal Credit Markets in Egypt," Economic Development and Cultural Change, University of Chicago Press, vol. 48(3), pages 657-670, April.
    5. Fatma El-Hamidi & Mona Said, 2014. "Gender-based wage and occupational inequality in the new millenium in Egypt," Journal of Developing Areas, Tennessee State University, College of Business, vol. 48(1), pages 21-41, January-M.
    6. Marcouiller, Douglas & Ruiz de Castilla, Veronica & Woodruff, Christopher, 1997. "Formal Measures of the Informal-Sector Wage Gap in Mexico, El Salvador, and Peru," Economic Development and Cultural Change, University of Chicago Press, vol. 45(2), pages 367-392, January.
    7. Stiglitz, Joseph E, 1976. "The Efficiency Wage Hypothesis, Surplus Labour, and the Distribution of Income in L.D.C.s," Oxford Economic Papers, Oxford University Press, vol. 28(2), pages 185-207, July.
    8. Maloney, William F., 2004. "Informality Revisited," World Development, Elsevier, vol. 32(7), pages 1159-1178, July.
    9. repec:pit:wpaper:338 is not listed on IDEAS
    10. Dirk Willem te Velde, 2003. "Do Workers in Africa Get a Wage Premium if Employed in Firms Owned by Foreigners?," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 12(1), pages 41-73, March.
    11. 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.
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    Cited by:

    1. Ahmed Fayez Abdelgouad, 2014. "Labor Law Reforms and Labor Market Performance in Egypt," Working Paper Series in Economics 314, University of Lüneburg, Institute of Economics.
    2. repec:pje:journl:article13winii is not listed on IDEAS

    More about this item

    Keywords

    informal employment; youth employment; human capital; developing country labor markets; wage regression;

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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