Is There an Informal Employment Wage Penalty? Evidence from South Africa

38 Pages Posted: 28 Nov 2007

See all articles by Eliane Badaoui

Eliane Badaoui

University of Cergy-Pontoise - THEMA

Eric Strobl

Ecole Polytechnique, Paris - Department of Economic Sciences; IZA Institute of Labor Economics

Frank Walsh

National University of Ireland - University College Dublin

Date Written: November 2007

Abstract

We estimate the wage penalty associated with working in the South African informal sector. To this end we use a rich data set on non-self employed males that allows one to accurately distinguish workers employed in the informal sector from those employed in the formal sector and link individuals over time. Implementing various econometric approaches we find that there is a gross wage penalty of a little over 18 per cent for working in the informal sector. However, once we reduce our sample to a group for which we can reasonably calculate earnings net of taxes and control for time invariant unobservables the wage penalty disappears.

Keywords: informal sector, wage penalty, South Africa

JEL Classification: J31, O17

Suggested Citation

Badaoui, Eliane and Strobl, Eric and Walsh, Frank, Is There an Informal Employment Wage Penalty? Evidence from South Africa (November 2007). IZA Discussion Paper No. 3151, Available at SSRN: https://ssrn.com/abstract=1033358 or http://dx.doi.org/10.2139/ssrn.1033358

Eliane Badaoui

University of Cergy-Pontoise - THEMA ( email )

33 boulevard du port
F-95011 Cergy-Pontoise Cedex, 95011
France

Eric Strobl (Contact Author)

Ecole Polytechnique, Paris - Department of Economic Sciences ( email )

Ecole Polytechnique
Department of Economics
Paris, 75005
France

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Frank Walsh

National University of Ireland - University College Dublin ( email )

Department of Economics
Belfield
Dublin 4
Ireland
353-1-7068697 (Phone)
353-1-2830068 (Fax)

HOME PAGE: http://www.ucd.ie/~economic/staff/fwalsh/

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