Earnings Inequality and Informal Employment in Russia
30 Pages Posted: 30 Oct 2013
Date Written: October 30, 2013
In this paper I investigate the impact of informality on earnings inequality in Russia using RLMS-HSE data for 2000-2010. I find that during the whole period earnings inequality was substantially higher in the informal sector. Informality increases earnings polarization, thereby widening both tails of the distribution. Changes in the earning distribution of the formal sector were mainly generated by changes in the distribution of hourly earnings. In the informal sector, reduction of inequality occurred via two channels: Differences in hourly rates and working hours both declined. Changes in the structure of informality and conditional wage differentials did not have a significant impact on the overall earnings inequality, with the exception of decline in irregular employment.
Keywords: earnings inequality, informal economy, decomposition, recentered influence functions
JEL Classification: C21, D63, J31, J42
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