Wage Differentials and Mobility in the Urban Labor Market: A Panel Data Analysis for Mexico

Arbeitspapier

We analyze wage differentials mobility between the formal and informal sector in urban Mexico, using panel data on five quarters drawn from Mexico?s Urban Employment Survey. We develop a dynamic random effects panel data model. It consists of two separate wage equations for the two sectors and a multinomial logit part explaining the labor market state, in which wages are 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. Simulated transition probabilities show that for male workers, the choice between formal and informal sector is driven by wage differentials and unobserved heterogeneity, while true state dependence is much less important. For women, nonparticipation is the most common labour market state, and true state dependence plays a much larger role.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 329

Classification and Topics

• Classification: Wirtschaft ; Wage Level and Structure; Wage Differentials ; Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics ; Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models ; Labor Demand
• Subject: Wage differentials ; informal sector ; mobility ; panel data ; Mexico ; Lohnstruktur ; Informeller Sektor ; Städtischer Arbeitsmarkt ; Arbeitsmobilität ; Schätzung ; Mexiko

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gong, Xiaodong ; van Soest, Arthur
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2001

Further information

• Handle: http://hdl.handle.net/10419/21186
• Last update: 10.03.2025, 11:43 AM CET