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Informality: Sectoral Selection and Earnings in Uruguay

Author

Listed:
  • Marisa Bucheli

    () (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)

  • Rodrigo Ceni

    () (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)

Abstract

In this paper we define informal workers as those who are not contributing to the social security system. We analyse the likelihood of being informal and we estimate the differentials in earnings between sectors using both the OLS estimation and a switching regression model. We assess the premium for being formal by predicting five different proxies of the average gap. We use the crosssection data reported in a 2005 household survey. We find that formality is more likely among the better-educated, women, people residing in the capital city, heads of households and full-time workers. In addition, we find that according to the five measures of the gap, earnings are higher in the formal than in the informal sector.

Suggested Citation

  • Marisa Bucheli & Rodrigo Ceni, 2007. "Informality: Sectoral Selection and Earnings in Uruguay," Documentos de Trabajo (working papers) 2007, Department of Economics - dECON.
  • Handle: RePEc:ude:wpaper:2007
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    References listed on IDEAS

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    1. Sangeeta Pratap & Erwan Quintin, 2001. "Are labor markets segmented in Argentina? a semiparametric approach," Center for Latin America Working Papers 0701, Federal Reserve Bank of Dallas.
    2. Michael J. Pisani & José A. Pagán, 2004. "Sectoral Selection and Informality: a Nicaraguan Case Study," Review of Development Economics, Wiley Blackwell, vol. 8(4), pages 541-556, November.
    3. Friedrich Schneider & Dominik Enste, 1999. "Shadow Economies Around the World - Size, Causes, and Consequences," CESifo Working Paper Series 196, CESifo Group Munich.
    4. Paula Auerbach & María Eugenia Genoni & Carmen Pagés, 2005. "Social Security Coverage and the Labor Market in Developing Countries," IDB Publications (Working Papers) 1111, Inter-American Development Bank.
    5. 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.
    6. Maddala, G.S., 1986. "Disequilibrium, self-selection, and switching models," Handbook of Econometrics,in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 3, chapter 28, pages 1633-1688 Elsevier.
    7. Marisa Bucheli & Alvaro Forteza & Ianina Rossi, 2006. "Seguridad social y género en Uruguay: un análisis de las diferencias de acceso a la jubilación," Documentos de Trabajo (working papers) 0406, Department of Economics - dECON.
    8. Emilio Espino & Martín González Rozada, 2012. "Automatic Stabilization and Fiscal Policy: Some Quantitative Implications for Latin America and the Caribbean," IDB Publications (Working Papers) 4130, Inter-American Development Bank.
    9. 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.
    10. Jaime Saavedra & Alberto Chong, 1999. "Structural reform, institutions and earnings: Evidence from the formal and informal sectors in urban Peru," Journal of Development Studies, Taylor & Francis Journals, vol. 35(4), pages 95-116.
    11. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
    12. Alvaro Forteza, 2003. "Seguridad social y competencia política," Documentos de Trabajo (working papers) 0403, Department of Economics - dECON.
    13. 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.
    14. Verónica Amarante, 2002. "Salarios públicos y privados : los diferentes segmentos del mercado laboral 1991-2000," Documentos de Trabajo (working papers) 02-04, Instituto de Economía - IECON.
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    Citations

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    Cited by:

    1. Bucheli, Marisa & Forteza, Alvaro & Rossi, Ianina, 2008. "Work history and the access to contributory pensions in Uruguay : some facts and policy options," Social Protection and Labor Policy and Technical Notes 90345, The World Bank.
    2. Rodrigo Ceni, 2014. "Informality and government enforcement in Latin America," Documentos de Trabajo (working papers) 14-21, Instituto de Economía - IECON.
    3. Rodrigo Ceni, 2014. "Social security schemes and labor supply in the formal and informal sectors," Documentos de Trabajo (working papers) 14-12, Instituto de Economía - IECON.
    4. Amarante, Verónica & Gómez, Marcela, 2016. "El proceso de formalización en el mercado laboral uruguayo," Estudios y Perspectivas – Oficina de la CEPAL en Montevideo 20, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    5. repec:bla:deveco:v:55:y:2017:i:4:p:261-289 is not listed on IDEAS
    6. Maira Caño-Guiral, 2015. "The non-observed economy in Uruguay. A look at the first decade of the 21st century," Documentos de trabajo 2015004, Banco Central del Uruguay.
    7. Ceyhun Elgin & Burak Sezgin, 2017. "Sectoral Estimates of Informality: A New Method and An Application to Turkish Economy," Working Papers 2017/02, Bogazici University, Department of Economics.
    8. Johan Sandberg, 2012. "Conditional Cash Transfers and Social Mobility: The Role of Asymmetric Structures and Segmentation Processes," Development and Change, International Institute of Social Studies, vol. 43(6), pages 1337-1359, November.
    9. repec:spr:izalpo:v:6:y:2017:i:1:d:10.1186_s40173-017-0085-1 is not listed on IDEAS

    More about this item

    Keywords

    informal sector; wage differential;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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