The Formal Sector Wage Premium and Firm Size

Eliane El Badaoui, Eric Strobl () and Frank Walsh

No 3145, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We show theoretically that when larger firms pay higher wages and are more likely to be caught defaulting on labour taxes, then large high-wage firms will be in the formal sector 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 the South African labour force survey we illustrate that firm size is indeed the key variable determining whether a formal sector premium exists.

Keywords: informal sector; wage premium; firm size (search for similar items in EconPapers)
JEL-codes: J42 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2007-11
New Economics Papers: this item is included in nep-afr and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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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 (2010)
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