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http://ssrn.com/abstract=1032587
 
 

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The Formal Sector Wage Premium and Firm Size


Eliane Badaoui


University of Cergy-Pontoise - THEMA

Eric Strobl


Ecole Polytechnique, Paris - Department of Economic Sciences; Institute for the Study of Labor (IZA)

Frank Walsh


National University of Ireland - University College Dublin

November 2007

IZA Discussion Paper No. 3145

Abstract:     
We show theoretically that when larger firms pay higher wages and are more likely to be caught defaulting on labour taxes, then large high-wage firms will be in the formal sector 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 the South African labour force survey we illustrate that firm size is indeed the key variable determining whether a formal sector premium exists.

Number of Pages in PDF File: 31

Keywords: informal sector, wage premium, firm size

JEL Classification: J42

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Date posted: November 26, 2007  

Suggested Citation

Badaoui, Eliane and Strobl, Eric and Walsh, Frank, The Formal Sector Wage Premium and Firm Size (November 2007). IZA Discussion Paper No. 3145. Available at SSRN: http://ssrn.com/abstract=1032587

Contact Information

Eliane Badaoui
University of Cergy-Pontoise - THEMA ( email )
33 boulevard du port
F-95011 Cergy-Pontoise Cedex, 95011
France
Eric Strobl
Ecole Polytechnique, Paris - Department of Economic Sciences ( email )
Ecole Polytechnique
Department of Economics
Paris, 75005
France
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
Frank Walsh (Contact Author)
National University of Ireland - University College Dublin ( email )
Department of Economics
Belfield
Dublin 4
Ireland
353-1-7068697 (Phone)
353-1-2830068 (Fax)
HOME PAGE: http://www.ucd.ie/~economic/staff/fwalsh/
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