Shadow price of working in the shadows: services industry evidence

Tufan Ekici and Mustafa Besim

The Service Industries Journal, 2018, vol. 38, issue 11-12, 708-722

Abstract: In this paper, we use an exogenous policy variation in the labour market to determine the wage gap between formally and informally employed workers. For our purposes, ‘informal employment’ describes employees who are not officially registered with any social security scheme. We use self-reported employee registration status to identify such workers, but the choice of working unregistered is not exogenous. Nevertheless, through an amnesty that was extended to only some workers in the labour market, we reduce the endogeneity problem, enabling estimation of the wage gap between these two groups. Our two-stage least square estimates reveal that the hourly wage penalty of working in the shadows is as high as 59%, and the monthly salary penalty is around 66%. Moreover, the wage gap is higher (as high as 70%) for those working in the services sector, as unregistered workers in this sector tend to be low skilled and low educated, and the monitoring of this sector is more difficult. Our analysis contributes to the literature by using an instrumental variable to treat the endogeneity of workers’ registration status. In addition, it shows that people working informally in the services industry receive a higher average wage penalty than other informally employed workers.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1080/02642069.2018.1467402 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:servic:v:38:y:2018:i:11-12:p:708-722

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/FSIJ20

DOI: 10.1080/02642069.2018.1467402

Access Statistics for this article

The Service Industries Journal is currently edited by Eileen Bridges, Professor Domingo Ribeiro, Ronald Goldsmith, Barry Howcroft and Youjae Yi

More articles in The Service Industries Journal from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().