Is There an Informal Employment Wage Penalty? Evidence from South Africa

Eliane El Badaoui, Eric Strobl () and Frank Walsh
Additional contact information
Eric Strobl: University of Bern

No 3151, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We estimate the wage penalty associated with working in the South African informal sector. To this end we use a rich data set on non-self employed males that allows one to accurately distinguish workers employed in the informal sector from those employed in the formal sector and link individuals over time. Implementing various econometric approaches we find that there is a gross wage penalty of a little over 18 per cent for working in the informal sector. However, once we reduce our sample to a group for which we can reasonably calculate earnings net of taxes and control for time invariant unobservables the wage penalty disappears.

Keywords: wage penalty; informal sector; South Africa (search for similar items in EconPapers)
JEL-codes: J31 O17 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2007-11
New Economics Papers: this item is included in nep-afr, nep-dev and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published - published in: Economic Development and Cultural Change, 2008, 56 (3), 683–710

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Journal Article: Is There an Informal Employment Wage Penalty? Evidence from South Africa (2008)
Working Paper: Is there an Informal Employment Wage Penalty? Evidence from South Africa (2008)
Working Paper: Is there an informal employment wage penalty? Evidence from South Africa (2008)
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