Formal Measures of the Informal Sector Wage Gap in Mexico, El Salvador, and Peru

Douglas Marcouiller, Veronica Ruiz de Castilla and Christopher Woodruff
Additional contact information
Veronica Ruiz de Castilla: University of Texas-Austin
Christopher Woodruff: University of California-San Diego

No 294., Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: Using comparable micro-level data from three countries, we ask what type of person works in the informal sector and whether informal workers earn lower wages than observationally equivalent workers in the formal sector. The characteristics of informal workers are similar across countries. Surprisingly, when we control for these personal characteristics, we find a significant wage premium associated with formal employment in El Salvador and Peru but a premium associated with work in the informal sector in Mexico. A model of endogenous selection offers little help in explaining the differences in wage patterns. The research casts doubt on the received wisdom that the informal sector, always and everywhere, is a poorly-paid but easily- entered refuge for those who have no other employment opportunities.

Keywords: Informal sector; wage differentials; Mexico; El Salvador; Peru (search for similar items in EconPapers)
JEL-codes: O17 J30 (search for similar items in EconPapers)
Date: 1995-03
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Published, Economic Development and Cultural Change, 1997, 45, 367-392.

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Related works:
Journal Article: Formal Measures of the Informal-Sector Wage Gap in Mexico, El Salvador, and Peru (1997)
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Persistent link: http://EconPapers.repec.org/RePEc:boc:bocoec:294

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