Wage Differentials and Mobility in the Urban Labor Market: A Panel Data Analysis for Mexico

Xiaodong Gong () and Arthur van Soest ()

No 329, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We analyze wage differentials mobility between the formal and informal sector in urban Mexico, using panel data on five quarters drawn from Mexico's Urban Employment Survey. We develop a dynamic random effects panel data model. It consists of two separate wage equations for the two sectors and a multinomial logit part explaining the labor market state,in which wages are included as explanatory variables. The model is estimated using simulated maximum likelihood. The estimates show that wage differentials increase with education level. The probability of formal sector mployment strongly increases with the wage differential. Simulated transition probabilities show that for male workers, the choice between formal and informal sector is driven by wage differentials and unobserved heterogeneity, while true state dependence is much less important. For women, nonparticipation is the most common labour market state, and true state dependence plays a much larger role.

Keywords: mobility; informal sector; Wage differentials; panel data; Mexico (search for similar items in EconPapers)
JEL-codes: C33 J23 J31 R23 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2001-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

Published - published in: Labour Economics, 2002, 9 (4), 513-529

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Journal Article: Wage differentials and mobility in the urban labour market: a panel data analysis for Mexico (2002)
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