Wage gap between segments of the labor market in Argentina

Abstract

In economies with dual labor markets, workers who work in the formal sector receive higher wages than those who work in the non-formal sector. This pur-pose of this article is to identify and quantify the weight of the determinants of the pay gap between formal and informal workers. To this end, a micro-econometric decomposition is applied to differentiate between rewards for formality and punishments for informality in terms of pay. It was found that the gap exists and that it is sensitive to the distributional structure of labor income. The productivity of those employed in both sectors and the charac-teristics of the job explain a large part of the pay gap. The unexplained part could be due to the structure of the markets and the relative surplus labor force resulting from the low absorptive power of the capital accumulation process.