Are Labor Markets Segmented in Argentina? A Semiparametric Approach

We use data from Argentina's household survey to evaluate the hypothesis that informal workers would expect higher wages in the formal sector. Using various definitions of informal employment we find that, on average, formal wages are higher than informal wages. Parametric tests suggest that a formal premium remains after controlling for individual and establishment characteristics. However, this approach suffers from several econometric problems, which we address with semiparametric methods. The resulting formal premium estimates prove either small and insignificant, or negative. In other words, we find no evidence that Argentina's labor markets are segmented along formal/informal lines.