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

  • Frost, Jon

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.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 12599.

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Date of creation: Sep 2008
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Handle: RePEc:pra:mprapa:12599
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  1. 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.
  2. M. Mohieldin & P. Wright, 1994. "Formal and Informal Credit Markets in Egypt," Working Papers 9415, Economic Research Forum, revised Oct 1994.
  3. 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 818-36, September.
  4. Rita Almeida & Pedro Carneiro, 2006. "Enforcement of regulation, informal labor and firm performance," CeMMAP working papers CWP02/06, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  5. 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.
  6. 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.
  7. 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.
  8. Maloney, William, 2003. "Informality revisited," Policy Research Working Paper Series 2965, The World Bank.
  9. Fatma El-Hamidi, 2007. "Have Economic Reforms Paid Off? Gender Occupational Inequality in the New Millennium in Egypt," Working Papers 338, University of Pittsburgh, Department of Economics, revised Feb 2008.
  10. 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.
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