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Carlo Alcaraz, Daniel Chiquiar and Manuel Ramos-Francia
''Wage differentials in Mexico's urban labor market''
( 2011, Vol. 31 No.3 )
We estimate wage differentials across different segments of the Mexican urban labor market. We use a panel sample of individuals which allows us to control for workers' observable and non-observable characteristics, by focusing on wage changes reported by individuals who move from one sector to another. The results suggest that the wage differential between the formal and informal sectors is positive and significant, and larger than the differential between industry and services. While we cannot distinguish formally between different hypotheses that could explain the existence of these differentials, our results seem to suggest that the main distortions in the Mexican labor market appear to be related more to labor regulations that affect the allocation of labor between the formal and informal sectors, than to differences in intrinsic characteristics of the production processes in industry and services.
Keywords: Informal Sector, Labor Market Distortions
JEL: J3 - Wages, Compensation, and Labor Costs: General
O1 - Economic Development: General
Manuscript Received : Jan 17 2011 Manuscript Accepted : Sep 02 2011

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