Are labor markets segmented in Argentina? a semiparametric approach

Sangeeta Pratap and Erwan Quintin

No 701, Center for Latin America Working Papers from Federal Reserve Bank of Dallas

Abstract: A large part of the theoretical literature on informal economic activities in developing nations is founded on the assumption that labor markets are segmented. In this paper, we evaluate this premise with data from Argentina's permanent household survey for the 1993-1995 time period. We consider various definitions of informality based on the benefits mandated by Argentina's labor laws. We find that average wages are significantly higher in the formal sector than in the informal sector. We proceed to use a matching estimator to correct for the possible endogeneity of employment outcomes. The wage premium becomes much smaller when one controls for individual characteristics such as age, education and gender, and establishment characteristics, notably size. We then make use to the panel structure of our data to compute a difference-indifference estimate of the formal wage premium. This estimate does not significantly differ from zero, suggesting that unobserved ability accounts for the remaining wage differences across sectors. We conclude that the assumption that labor markets are competitive in Argentina cannot be rejected. The paper also provides a list of facts with which a satisfactory theory of informality for Latin America should be consistent. ; Economic Research Working Paper 0110

Keywords: Argentina; Financial crises - Latin America; Labor market; Employment (Economic theory) (search for similar items in EconPapers)
Date: 2001
New Economics Papers: this item is included in nep-ifn and nep-pke
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Working Paper: Are labor markets segmented in Argentina? a semiparametric approach (2003)
Working Paper: Are Labor Markets Segmented in Argentina? A Semiparametric Approach (2002)
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