Do Workers Pay for Social Protection? An Analysis of Wage Differentials in the Egyptian Private Sector

Ragui Assaad (assaad@umn.edu)

No 9610, Working Papers from Economic Research Forum

Abstract: This paper examines whether private employers are able to pass the cost of protective social regulations to their workers in the form of lower wages. I answer this question by decomposing wage differentials between protected and unprotected workers into components explained by differences in observable characteristics and unobserved heterogeneity and an unexplained component. I conclude that, while there are positive compensating differentials for employment instability and work outside fixed establishments, unprotected workers are not compensated for the lack of social protection. In fact, protected workers appear to receive positive wage premia, primarily in the form of higher returns on their human capital. I also find that the additional cost of female-specific protections is not passed on to protected female workers in the form of lower wages, suggesting that it may instead limit female employment in that sector.

Date: 1996-04-04, Revised 1996-04-04
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