Is there an informal employment wage penalty in Egypt? Evidence from quantile regression on panel data

TANSEL A., KESKİN H. İ., Ozdemir Z. A.

EMPIRICAL ECONOMICS, vol.58, no.6, pp.2949-2979, 2020 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 58 Issue: 6
  • Publication Date: 2020
  • Doi Number: 10.1007/s00181-019-01651-2
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, IBZ Online, International Bibliography of Social Sciences, ABI/INFORM, Business Source Elite, Business Source Premier, EconLit, Geobase, Public Affairs Index
  • Page Numbers: pp.2949-2979
  • Keywords: Formal and informal wage gap, Quantile regression, Panel data, Egypt, URBAN LABOR-MARKET, EARNINGS, SECTOR, SEGMENTATION, MOBILITY, MEXICO, GAP
  • Middle East Technical University Affiliated: Yes


This is the first study that uses panel data to assess the magnitude of the informal sector wage gap in Egypt. We consider the private sector male wage earners in Egypt and examine their wage distribution during 1998-2012 using the Egyptian Labor Market Panel Survey. We estimate Mincer wage equations both at the mean and at different quantiles of the wage distribution taking into account observable and unobservable characteristics with a fixed effect model. We also consider the possibility of nonlinearity in covariate effects and estimate a variant of matching models. We find a persistent informal wage penalty in the face of extensive sensitivity checks. It is smaller when unobserved heterogeneity is taken into account, and unlike many previous studies, there are very few differences across the conditional wage distribution. We also examine the informal wage penalty over time and in different subgroups according to age and education. The informal wage penalty has increased recently over time and is larger for the higher educated and the young.