The Formal Sector Wage Premium and Firm Size

Eliane El Badaoui, Eric Strobl () and Frank Walsh

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Abstract: We show theoretically that when larger firms pay higher wages and are more likely to be caught defaulting on labor taxes, then large-high wage firms will be in the formal and small-low wage firms will be in the informal sector. The formal sector wage premium is thus just a firm size wage differential. Using data from Ecuador we illustrate that firm size is indeed the key variable determining whether a formal sector premium exists.

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Date: 2010
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Citations: View citations in EconPapers (25)

Published in Journal of Development Economics, 2010, 91, pp.37-47

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Related works:
Journal Article: The formal sector wage premium and firm size (2010)
Working Paper: The formal sector wage premium and firm size (2010)
Working Paper: The Formal Sector Wage Premium and Firm Size (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02124906

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