Is there an informal employment wage penalty in Egypt? Evidence from quantile regression on panel data

Tansel, Aysıt; Keskin, Halil İbrahim; Özdemir, Zeynel Abidin

doi:10.1007/s00181-019-01651-2

Cited by 15 publications

(23 citation statements)

References 47 publications

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“…Since then the share of informal employment in Turkey is quite stagnant and remained to be 34% for the last couple of years. While this ratio is above the developed country averages, it is lower than a number of developing economies such as Egypt and Mexico with 45% and 43% of informality, respectively, using the social security definition (Tansel et al, 2019). Traditionally, the source of wage gaps between formal and informal employment are explained by either segmentation or competition theories, which emphasize productivity differentials, institutional variation, and non-pecuniary benefits (Roy, 1951;Maloney, 2004;Tokman, 1982).…”

Section: Review Of Informal Employment and Its Evolution In Turkeymentioning

confidence: 96%

Pay Gaps and Mobility for Lower and Upper Tier Informal Sector Employees: an investigation of the Turkish labor market

Duman

2020

Preprint

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Many empirical studies found wage gaps between formal and informal sector workers even after controlling for a number of individual and firm level characteristics. While there is limited amount of research considering the same question in the Turkish labor market, wage gap between formal and informal employees generally do not take unobserved characteristics into account. In our paper, we carry this analysis for Turkey and estimate the wage gap between formal and informal sector workers utilizing panel data from Survey of Income and Living Conditions (SILC) for the period of 2014 and 2017. Mincer wage equations across quantiles are estimated considering observable and unobservable characteristics with a fixed effect model, and for sensitivity tests we regard the possibility of nonlinearity in covariate effects and estimate a variant of matching models. Our results show that informal wage penalty is persistent even after unobserved heterogeneity is taken into account, however, the penalty is not statistically significant at the upper end of the wage distribution. Moreover, we show that there are important differences between informal workers who have permanent contracts versus informal workers that have relatively more irregular work arrangements. Not only the latter is subject to earnings reductions, but they also have slightly lower probability of moving out of informal employment. We also demonstrate that the mobility of lower and upper tier informal workers is affected by different variables.

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Section: Review Of Informal Employment and Its Evolution In Turkeymentioning

confidence: 96%

Pay Gaps and Mobility for Lower and Upper Tier Informal Sector Employees: an investigation of the Turkish labor market

Duman

2020

Preprint

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“…A closely related paper to ours is Tansel, Keskin, and Ozdemir (2019). After carrying out a number of econometrical variations to take into account observable and non-observable characteristics, potential selection problems and the possibility of non-linearity of covariate effects they find that the informal sector wage penalty (compared to the formal) is robust, despite smaller the more accurate the technique.…”

Section: Some Drivers Of Wage Inequalitymentioning

confidence: 72%

“…We, on the other hand, decompose the change in inequality over the two periods to that attributed to the sector/formality status as well to other individual characteristics of labour market participants. Tansel, Keskin, and Ozdemir (2019) have confirmed an informality wage penalty after controlling for a range of characteristics, here we quantify the contribution of informality to the observed change in wage inequality along the wage distribution. We also decompose this change in inequality into its two parts, the first is the composition effect which is a shared effect, i.e.…”

Section: Some Drivers Of Wage Inequalitymentioning

confidence: 98%

“…In the literature most frequently informal jobs are associated with unregistered workers, jobs with no contract, non-payment of taxes, not being subject to labour market regulations (e.g. the minimum wage), protection, unemployment insurance, health and safety regulations and retirement benefits (Tansel, Keskin, and Ozdemir 2019), all of which normally move together. A waged worker has worked for monetary or in-kind in compensation for at least 1 hour in the reference week of the survey.…”

Section: The Ffl Approach 16mentioning

confidence: 99%

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The informalization of the Egyptian economy (1998–2012): a driver of growing wage inequality

El-Haddad

Gadallah

2020

Applied Economics

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We run recentered influence function (RIF) regressions, using Firpo et al. (2007) distributional approach to identify each control variable's contribution on the decomposition of wage changes. Using the Egyptian Labour Market Surveys 1998-2012 for waged men we find that wage changes between 1998 and 2012 mainly resulted in increased inequality. The richer percentiles have persistently enjoyed disproportionately larger positive changes in real hourly wages. Whilst increasing in all three wage gaps, inequality increased the most between the top and bottom deciles (90-10 gap), i.e. between the lowest and highest wage earners. This increase in inequality is primarily driven by the unexplained wage structure effect. The distinct labour market segments are foremost responsible for the increased inequality trend. Private sector informality is the largest contributor to increased inequality. The sector does not adhere to a minimum wage, and being unregulated it has responded dramatically to the severe competitive pressures caused by the departing middle classes of the public sector. It suppressed mid and low-end wages resulting in sharp wage gaps at the tails. Public sector wage setting dynamics and the direction of labour movements since liberalization cause the sector to contribute more to wage inequality than does its formal private counterpart.

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“…Evidence showing a larger wage penalty in the lower part of the wage distribution is viewed as proof of the two-tier informal sector (Tannuri-Pianto and Pianto, 2002;Botelho and Ponczek, 2011;Lehmann and Zaiceva, 2013). But there are also a few studies using this method that do not find evidence supporting this hypothesis (Nguyen et al, 2013;Bargain and Kwenda, 2014;Staneva and Arabsheibani, 2014;Tansel et al, 2020). Another approach is to use information on the voluntary or involuntary nature of a respondent's informal employment, as the two-tier hypothesis assumes that the former will earn higher wages than formal workers and the latter will earn lower wages (Lehmann and Pignatti, 2018).…”

Section: Introductionmentioning

confidence: 99%

Informal Employment and Wages in Poland

Liwiński

2020

SSRN Journal

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Is there an informal employment wage penalty in Egypt? Evidence from quantile regression on panel data

Cited by 15 publications

References 47 publications

Pay Gaps and Mobility for Lower and Upper Tier Informal Sector Employees: an investigation of the Turkish labor market

Pay Gaps and Mobility for Lower and Upper Tier Informal Sector Employees: an investigation of the Turkish labor market

The informalization of the Egyptian economy (1998–2012): a driver of growing wage inequality

Informal Employment and Wages in Poland

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