Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/71312
Authors: 
Bargain, Olivier
Kwenda, Prudence
Year of Publication: 
2009
Series/Report no.: 
Working Paper Series, UCD Centre for Economic Research 09/05
Abstract: 
This paper provides new evidence on the wage gap between informal and formal salary workers in South Africa, Brazil and Mexico. We use rich datasets that allow us to define informality in a relatively comparable fashion across countries. We compute precise wage differentials by accounting for taxes paid in the formal sector. For each country, we analyze how the sectoral wage gap varies within groups, between groups and over time. To account for unobserved heterogeneity, we use large (unbalanced) panels to estimate fixed effects models at the mean and at different points of the wage distribution. We find that unobserved heterogeneity explains a large part of the (conditional) wage gap. The remaining informal sector wage penalty is large in the lower part of the distribution but almost disappears at the top. The penalty primarily concerns young workers and is found to be procyclical. We carefully investigate the robustness of these results and discuss their policy implications as well as regularities across countries.
Subjects: 
Wage gap
Informal sector
Quantile regression
Fixed effects model
Selection
JEL: 
J21
J23
J24
J31
C14
O17
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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