The formal sector wage premium and firm size
We show theoretically that when larger firms pay higher wages and are more likely to be caught defaulting on labor taxes, then large-high wage firms will be in the formal 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 Ecuador we illustrate that firm size is indeed the key variable determining whether a formal sector premium exists.
Year of publication: |
2010
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Authors: | El Badaoui, Eliane ; Strobl, Eric ; Walsh, Frank |
Published in: |
Journal of Development Economics. - Elsevier, ISSN 0304-3878. - Vol. 91.2010, 1, p. 37-47
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Publisher: |
Elsevier |
Keywords: | Formal sector wage premium Firm size |
Saved in:
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