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Competitive and Segmented Informal Labor Markets

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  • Günther, Isabel

    (ETH Zurich)

  • Launov, Andrey

    (University of Kent)

Abstract

It has been recently argued that the informal sector of the labor market in a developing economy shows a dual structure with one part of it being competitive to the formal sector and another part being the result of market segmentation. To test this hypothesis we formulate an econometric model which allows for a heterogeneous informal sector with unobserved individual affiliation and which takes into account selection bias induced by the employment decision of individuals. Our test results for the urban labor market in Côte d'Ivoire indeed show existence of both competitive and segmented employment in the informal sector.

Suggested Citation

  • Günther, Isabel & Launov, Andrey, 2006. "Competitive and Segmented Informal Labor Markets," IZA Discussion Papers 2349, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp2349
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    References listed on IDEAS

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    Cited by:

    1. Aysit Tansel & Halil Ibrahim Keskin & Zeynel Abidin Ozdemir, 2015. "Is There an Informal Employment Wage Penalty in Egypt?," Working Papers 976, Economic Research Forum, revised Dec 2015.
    2. Olivier Bargain & Prudence Kwenda, 2014. "The Informal Sector Wage Gap: New Evidence Using Quantile Estimations on Panel Data," Economic Development and Cultural Change, University of Chicago Press, vol. 63(1), pages 117-153.
    3. T. H. Gindling & Nadwa Mossaad & David Newhouse, 2016. "How Large are Earnings Penalties for Self-Employed and Informal Wage Workers?," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-39, December.
    4. Aysit Tansel & Elif Oznur Acar, 2016. "The Formal/Informal Employment Earnings Gap: Evidence from Turkey," Research on Economic Inequality,in: Inequality after the 20th Century: Papers from the Sixth ECINEQ Meeting, volume 24, pages 121-154 Emerald Publishing Ltd.
    5. Jagannadha Tamvada, 2010. "Entrepreneurship and welfare," Small Business Economics, Springer, vol. 34(1), pages 65-79, January.
    6. Gindling,T. H. & Mossaad,Nadwa & Newhouse,David Locke, 2016. "Earnings premiums and penalties for self-employment and informal employees around the world," Policy Research Working Paper Series 7530, The World Bank.
    7. Falco, Paolo & Maloney, William F. & Rijkers, Bob & Sarrias, Mauricio, 2015. "Heterogeneity in subjective wellbeing: An application to occupational allocation in Africa," Journal of Economic Behavior & Organization, Elsevier, vol. 111(C), pages 137-153.
    8. Eliane El Badaoui & Eric Strobl & Frank Walsh, 2008. "Is There an Informal Employment Wage Penalty? Evidence from South Africa," Economic Development and Cultural Change, University of Chicago Press, vol. 56(3), pages 683-710, April.
    9. Mélika Salem & Isabelle Bensidoun, 2012. "The heterogeneity of informal employment and segmentation in the Turkish labour market," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 17(4), pages 578-592.
    10. James Heintz & Dorrit Posel, 2008. "Revisiting Informal Employment And Segmentation In The South African Labour Market," South African Journal of Economics, Economic Society of South Africa, vol. 76(1), pages 26-44, March.
    11. Siba, Eyerusalem, 2015. "Returns to Physical Capital in Ethiopia: Comparative Analysis of Formal and Informal Firms," World Development, Elsevier, vol. 68(C), pages 215-229.
    12. Alex Coad & Jaganaddha Tamvada, 2012. "Firm growth and barriers to growth among small firms in India," Small Business Economics, Springer, vol. 39(2), pages 383-400, September.
    13. Bargain, Olivier & Magejo, Prudence, 2010. "Is Informality Bad? Evidence from Brazil, Mexico and South Africa," IZA Discussion Papers 4711, Institute of Labor Economics (IZA).
    14. Olivier Bargain & Prudence Kwenda, 2009. "The Informal Sector Wage Gap: New Evidence Using Quantile Regressions on Panel Data," CEDI Discussion Paper Series 09-06, Centre for Economic Development and Institutions(CEDI), Brunel University.
    15. Philippe Adair & Youghourta Bellache, 2014. "Labour mobility and the informal sector in Algeria: a cross-sectional comparison (2007-2012)," TEPP Working Paper 2014-07, TEPP.
    16. Vega Núñez, Adriana Patricia, 2017. "Analysis of formal-informal transitions in the Ecuadorian labour market," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    17. Aysit Tansel & Halil Ibrahim Keskin & Zeynel Abidin Ozdemir, 2015. "Is There An Infırmal Employment Wage Penalty in Egypt?," ERC Working Papers 1508, ERC - Economic Research Center, Middle East Technical University, revised Sep 2015.

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    More about this item

    Keywords

    segmentation; informal labor market; comparative advantage; selection bias; developing economy; finite mixture models; latent structure;
    All these keywords.

    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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