Bound To Lose, Bound To Win? The Financial Crisis and the Informal-Formal Sector Earnings Gap in Serbia

No 9231, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: While the informal sector has received widespread attention in academic and policy arenas in recent decades, knowledge gaps and controversies remain. First, while the evidence is starting to emerge, there is still more to learn about the formal-informal sector earnings gap of the former Socialist regimes of Eastern Europe and Central Asia. Second, the widespread debate in both academic and policy circles of what constitutes "the" informal sector has led to substantial controversy and different definitions. Third, our knowledge is scarce regarding the impact of the current financial crisis on labor markets – both formal and informal. By examining the incidence and determinants of the formal-informal sector earnings gap for adult male dependent employees using two identical, nationally representative labor force surveys for Serbia – one just prior to the impact of the recent international financial crisis and one about a year into the crisis – for three alternative measures of informality, this paper adds to our understanding in all three of these dimensions. Among the main results is the finding of a substantively large formal-informal sector gap (favoring the formal sector), which appears to have decreased substantially overall following the crisis. Additional results suggest that formal sector workers are concentrated in better paying industries and occupations and have more education and other favorable characteristics than informal sector workers, and at the same time also have higher returns to their (already favorable) characteristics overall, with education and part-time status consistently among the main drivers of the observed gap.

Keywords: international financial crisis; formal-informal sector earnings gap; labor market segmentation; earnings decomposition; detailed earnings decomposition; Serbia (search for similar items in EconPapers)
JEL-codes: I24 J31 J42 J46 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2015-07
New Economics Papers: this item is included in nep-iue, nep-lma and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Published - published in: IZA Journal of Labor and Development, 2015, 4:13

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Journal Article: Bound to lose, bound to win? The financial crisis and the informal-formal sector earnings gap in Serbia (2015)
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