Diana Contreras Suarez - Sticky floors in developing countries - a distributional analysis of the formal and informal sector

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Jan Kabátek

j.kabatek@unimelb.edu.au

Melbourne Institute Brown Bag

Title: Sticky floors in developing countries - a distributional analysis of the formal and informal sector

Abstract: This paper decomposes the gender wage gap in Indonesia into explained and unexplained gaps. We use the method of (Firpo, Fortin, & Lemieux, 2009) to decompose the wage gap along the earnings distribution and do this for both the formal and informal sector. Our main data source is the 2011 Indonesian National Socioeconomic Survey which allows the construction of some key human capital variables that determine labour productivity (e.g. career interruptions). We find wage gaps to be higher in the informal sector but decreasing as earnings increase. The gender wage gap in the informal sector decreases from 63% at the 10th percentile of the wage distribution to 46% at the 90th percentile. The corresponding decline in the formal sector is from 63% to 13%. We find strong evidence of sticky floors in the formal sector and for younger cohorts of women working in the informal sector.

Presenter: Diana Contreras Suarez, Melbourne Institute

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