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

Peter Huber and Ulugbek Rahimov

No 2014-48, MENDELU Working Papers in Business and Economics from Mendel University in Brno, Faculty of Business and Economics

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.

Keywords: formal/informal sector wages; self selection; segmentation (search for similar items in EconPapers)
JEL-codes: J21 J31 J42 (search for similar items in EconPapers)
Pages: 28
Date: 2014-09
New Economics Papers: this item is included in nep-cwa, nep-iue, nep-lab and nep-tra
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