Are labor markets segmented in developing countries? A semiparametric approach |
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Authors: | Sangeeta Pratap |
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Affiliation: | a Department of Economics, Hunter College and the Graduate Center, City University of New York, New York, NY 10031, USA b Federal Reserve Bank of Dallas, USA |
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Abstract: | We test the hypothesis that observably similar workers earn higher wages in the formal sector than in the informal sector in developing nations. Using data from Argentina's household survey and various definitions of informal employment, we find that on average, formal wages are higher than informal wages. Parametric tests suggest that a formal premium remains after controlling for individual and establishment characteristics. However, this approach suffers from several econometric problems, which we address with semiparametric methods. The resulting formal premium estimates prove either small and insignificant, or negative. Neither do we find significant differences in measures of job satisfaction between the two sectors. We invoke these results to question the mainstream view that labor markets are segmented along formal/informal lines in developing nations such as Argentina. |
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Keywords: | C14 J42 O17 |
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