Heterogeneity in the Egyptian informal labour market: Choice or obligation?

Abstract

This paper provides historical and empirical arguments that can explain the development of the Egyptian informal sector. After recalling the various approaches proposed in the literature, it identifies the configuration that overrides the Egyptian labor market by allowing for the heterogeneity of informal jobs and therefore the existence of different segments within the informal sector using a mixture model. It concludes that the Egyptian informal labor market in 2006 was composed of two segments with a distinct wage equations. This may point to the existence of barriers to entry to each sector, e.g. fixed cost related to social stigma which prevent people from working in the sector which offers them the highest expected wage.