The returns to formality and informality in urban Africa

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dc.creatorFalco, Paulo
dc.creatorKerr, Andrew
dc.creatorRankin, Neil
dc.creatorSandefur, Justin
dc.creatorTeal, Francis
dc.date2014-06-10T10:03:08Z
dc.date2014-06-10T10:03:08Z
dc.date2011
dc.date.accessioned2015-05-28T10:06:38Z
dc.date.available2015-05-28T10:06:38Z
dc.date.issued2015-05-28
dc.descriptionThis paper addresses the questions as to the size and causes of earnings differentials in two urban African labor markets, those of Ghana and Tanzania. We have panel data so we can ask how far time invariant unobservables, market ability for short, matters in the determination of earnings. We also have information on whether the individual is own self-employed, self-employed with employees, a private or public sector wage employee and the size of the enterprise in which wage employees work or which the self-employed owns. We find, mirroring work on developed economies, that unobserved individual market ability is by far the most important factor explaining the variance of earnings. With controls for such ability the gap between private wage employment and civil servants is about 50%. With controls for enterprise size we find that wage employees earn the same as the self-employed in both Ghana and Tanzania. Enterprise size matters. At most half of the OLS effect of size on earnings can be explained by unobservable ability. Workers in the largest firms are the high earners with wage rates which exceed those of civil servants. These results all assume exogenous movement. We find evidence that endogeneity bias may be serious and may be understating the extent of both the size effect and the private sector wage (negative) premium. The implications of our results for understanding the nature of formal and informal employment in Africa are discussed.
dc.identifierFalco, P., Kerr, A., Rankin, N., Sandefur, J. and Teal, F. (2011). The returns to formality and informality in urban Africa, Labour Economics, 18: S23-S31.
dc.identifierhttp://www.sciencedirect.com/science/article/pii/S0927537111001023
dc.identifierhttp://hdl.handle.net/11090/717
dc.identifier.ris TY - Journal Article DA - 2015-05-28 DB - OpenUCT DP - University of Cape Town KW - African labour markets KW - Ghana KW - Tanzania KW - Panel data analysis KW - Employment KW - Earnings differentials KW - Informal employment LK - https://open.uct.ac.za PB - University of Cape Town PY - 2015 T1 - The returns to formality and informality in urban Africa TI - The returns to formality and informality in urban Africa UR - http://hdl.handle.net/11090/717 ER - en_ZA
dc.identifier.urihttp://hdl.handle.net/11090/717
dc.languageen
dc.publisherLabour Economics
dc.publisher.departmentSALDRUen_ZA
dc.publisher.facultyFaculty of Commerceen_ZA
dc.publisher.institutionUniversity of Cape Town
dc.subjectAfrican labour markets
dc.subjectGhana
dc.subjectTanzania
dc.subjectPanel data analysis
dc.subjectEmployment
dc.subjectEarnings differentials
dc.subjectInformal employment
dc.titleThe returns to formality and informality in urban Africa
dc.typeJournal Article
uct.type.publicationResearchen_ZA
uct.type.resourceArticleen_ZA
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