Increasing wage dispersion and the changes in relative employment and wages in Mexico's urban informal sector: 1987-1993

Jose Pagan and Jose Tijerina-Guajardo

Applied Economics, 2000, vol. 32, issue 3, 335-347

Abstract: This study analyses the role of changes in informal/formal relative employment, wage levels and wage inequality in explaining increasing wage dispersion in Mexico during the 1987-1993 period. From 1987 to 1993, the variance of the log of hourly wages for Mexican workers increased by more than 50 per cent. Using data from the Encuesta nacional de empleo urbano we find that this increase in the overall wage dispersion was mainly driven by increasing wage dispersion in the formal sector coupled with a faster growth in formal sector employment as a percentage of total employment. However, compression in the distribution of wages within the informal sector contributed to substantially slowdown the increasing overall wage inequality. About 60 per cent of the 1987-1993 4.65 percentage point reduction in the informal sector share of total employment is explained by changes in the structure that determines sectoral employment; the rest is explained by changes in the composition of the labour force, particularly increases in the sectoral education gap and a change in the regional relative share of sectoral employment. Also, from 1987 to 1993 the sectoral wage ratio increased from 0.59 to 0.63. It seems that a relative improvement in unobserved skills in the informal sector helped to close the wage differential but this effect was partially offset by an increase in the relative prices of both observed and unobserved skills, as well as increases in relative observed skills in the formal sector, particularly education.

Date: 2000
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/000368400322769 (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:applec:v:32:y:2000:i:3:p:335-347

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/000368400322769

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().