Wage differentials and mobility in the urban labour market

A panel data analysis for Mexico

Xiaodong Gong, Arthur Van Soest

Research output: Contribution to journalArticle

62 Citations (Scopus)

Abstract

We analyze wage differentials and transitions between the formal and informal sectors in urban Mexico. We use panel data on five quarterly waves from Mexico's Urban Employment Survey. We develop a dynamic random effects panel data model consisting of separate wage equations for the two sectors and a logit part explaining the labour market state with wages 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 employment strongly increases with the wage differential. For male workers, the choice between formal and informal sector is driven by wage differentials and unobserved heterogeneity, and true state dependence is not important. For women, non-participation is the most common labour market state, and true state dependence plays a much larger role.

Original languageEnglish
Pages (from-to)513-529
Number of pages17
JournalLabour Economics
Volume9
Issue number4
DOIs
Publication statusPublished - 23 Aug 2002
Externally publishedYes

Fingerprint

Panel data analysis
Mexico
Urban labor markets
Wage differentials
Market states
Labour market
State dependence
Formal and informal sectors
Panel data
Wages
Wage equation
Simulated maximum likelihood
Random effects
Workers
Unobserved heterogeneity
Logit
Education

Cite this

@article{523ed67e91f348cca98fde885c585c87,
title = "Wage differentials and mobility in the urban labour market: A panel data analysis for Mexico",
abstract = "We analyze wage differentials and transitions between the formal and informal sectors in urban Mexico. We use panel data on five quarterly waves from Mexico's Urban Employment Survey. We develop a dynamic random effects panel data model consisting of separate wage equations for the two sectors and a logit part explaining the labour market state with wages 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 employment strongly increases with the wage differential. For male workers, the choice between formal and informal sector is driven by wage differentials and unobserved heterogeneity, and true state dependence is not important. For women, non-participation is the most common labour market state, and true state dependence plays a much larger role.",
keywords = "Informal sector, Mexico, Mobility, Panel data, Wage differentials",
author = "Xiaodong Gong and {Van Soest}, Arthur",
year = "2002",
month = "8",
day = "23",
doi = "10.1016/S0927-5371(02)00045-3",
language = "English",
volume = "9",
pages = "513--529",
journal = "Labour Economics",
issn = "0927-5371",
publisher = "Elsevier",
number = "4",

}

Wage differentials and mobility in the urban labour market : A panel data analysis for Mexico. / Gong, Xiaodong; Van Soest, Arthur.

In: Labour Economics, Vol. 9, No. 4, 23.08.2002, p. 513-529.

Research output: Contribution to journalArticle

TY - JOUR

T1 - Wage differentials and mobility in the urban labour market

T2 - A panel data analysis for Mexico

AU - Gong, Xiaodong

AU - Van Soest, Arthur

PY - 2002/8/23

Y1 - 2002/8/23

N2 - We analyze wage differentials and transitions between the formal and informal sectors in urban Mexico. We use panel data on five quarterly waves from Mexico's Urban Employment Survey. We develop a dynamic random effects panel data model consisting of separate wage equations for the two sectors and a logit part explaining the labour market state with wages 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 employment strongly increases with the wage differential. For male workers, the choice between formal and informal sector is driven by wage differentials and unobserved heterogeneity, and true state dependence is not important. For women, non-participation is the most common labour market state, and true state dependence plays a much larger role.

AB - We analyze wage differentials and transitions between the formal and informal sectors in urban Mexico. We use panel data on five quarterly waves from Mexico's Urban Employment Survey. We develop a dynamic random effects panel data model consisting of separate wage equations for the two sectors and a logit part explaining the labour market state with wages 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 employment strongly increases with the wage differential. For male workers, the choice between formal and informal sector is driven by wage differentials and unobserved heterogeneity, and true state dependence is not important. For women, non-participation is the most common labour market state, and true state dependence plays a much larger role.

KW - Informal sector

KW - Mexico

KW - Mobility

KW - Panel data

KW - Wage differentials

UR - http://www.scopus.com/inward/record.url?scp=0036348631&partnerID=8YFLogxK

U2 - 10.1016/S0927-5371(02)00045-3

DO - 10.1016/S0927-5371(02)00045-3

M3 - Article

VL - 9

SP - 513

EP - 529

JO - Labour Economics

JF - Labour Economics

SN - 0927-5371

IS - 4

ER -