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Formal and Informal Sector Wage Differences in Transition Economies: Evidence from Tajikistan

Author

Listed:
  • Petr Huber

    (Austrian Institute for Economic Research (WIFO), Arsenal, Objekt 20, 1030 Wien and Faculty of Business and Economics, Mendel University in Brno.)

  • Ulugbek Rahimov

    (Faculty of Economics, Westminster International University in Tashkent)

Abstract

Analyzing the self-selection of workers into formal and informal sector employment in Tajikistan, a poor transition economy, with higher informal sector than formal sector wages and an informal sector employment share exceeding 50 percent, we find that the selection of formal and informal sector workers is based on comparative advantages rather that labor market segmentation. Furthermore, labor supply to the two sectors reacts rather elastically to relative wages. Policies increasing relative wages in the formal sector could thus be effective in reducing the high informal sector employment share in this country.

Suggested Citation

  • Petr Huber & Ulugbek Rahimov, 2014. "Formal and Informal Sector Wage Differences in Transition Economies: Evidence from Tajikistan," MENDELU Working Papers in Business and Economics 2014-48, Mendel University in Brno, Faculty of Business and Economics.
    • Handle: RePEc:men:wpaper:48_2014
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    References listed on IDEAS

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    More about this item

    Keywords

    formal/informal sector wages; self selection; segmentation;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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