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Offering evidence from both detailed individual country studies and homogenized statistics across the Latin American and Caribbean region, this book examines the impact of the minimum wage on wages, employment, poverty, income distribution and government budgets in the context of a large informal sector and predominantly unskilled workforces.

This paper analyzes the selection of workers to informal and formal sector employment in Tajikistan. It estimates multinomial selection bias correction model to assess the impact of observable and unobservable characteristics on the self-selection of workers into the formal and informal sector and on sector specific wages using individual level data from the Tajikistan Standards of Living Survey of 2007. The results suggest that selection of workers on both observable and unobservable characteristics to these sectors is broadly consistent with self-selection on comparative advantages, that the self-selection of workers on unobservable characteristics is the main reason for higher wages in the informal than the formal sector in Tajikistan and that relative wages in the two sectors have a rather strong impact on the decision of workers to work in the formal or informal sector.

We develop an equilibrium wage-posting model with heterogeneous firms that decide to locate in the formal or the informal sector and workers who search randomly on and off the job. We estimate the model on Brazilian labor force survey data. In equilibrium, firms of equal productivity locate in different sectors, a fact observed in the data. Wages are characterized by compensating differentials. We show that tightening enforcement does not increase unemployment and increases wages, total output, and welfare by enabling better allocation of workers to higher productivity jobs and improving competition in the formal labor market.

We study a recent recruitment drive for public sector positions in Mexico. Different salaries were announced randomly across recruitment sites, and job offers were subsequently randomized. Screening relied on exams designed to measure applicants’ intellectual ability, personality, and motivation. This allows the first experimental estimates of (1) the role of financial incentives in attracting a larger and more qualified pool of applicants, (2) the elasticity of the labor supply facing the employer, and (3) the role of job attributes (distance, attractiveness of the municipal environment) in helping fill vacancies, as well as the role of wages in helping fill positions in less attractive municipalities. A theoretical model of job applications and acceptance guides the empirical inquiry. We find that higher wages attract more able applicants as measured by their IQ, personality, and proclivity toward public sector work—that is, we find no evidence of adverse selection effects on motivation; higher wage offers also increased acceptance rates, implying a labor supply elasticity of around 2 and some degree of monopsony power. Distance and worse municipal characteristics strongly decrease acceptance rates, but higher wages help bridge the recruitment gap in worse municipalities.

This paper proposes a framework to identify the effects of the minimum wage on the joint distribution of sector and wage in a developing country. I show how the discontinuity of the wage distribution around the minimum wage identifies the extent of noncompliance with the minimum wage policy, and how the conditional probability of sector given wage recovers the relationship between latent sector and wages. I apply the method in the “PNAD,” a nationwide representative Brazilian cross-sectional dataset for the years 2001–2009. The results indicate that the size of the informal sector is increased by around 39% compared to what would prevail in the absence of the minimum wage, an effect attributable to (i) unemployment effects of the minimum wage on the formal sector and (ii) movements of workers from the formal to the informal sector as a response to the policy.

West African countries are ranked especially low in global corruption perception indexes. The health sector is often singled out for particular concern given the role of corruption in hampering access to, and utilization of health services, representing a major barrier to progress to universal health coverage and to achieving the health-related Sustainable Development Goals. The first step in tackling corruption systematically is to understand its scale and nature. We present a systematic review of literature that explores corruption involving front-line healthcare providers, their managers and other stakeholders in health sectors in the five Anglophone West African (AWA) countries: Gambia, Ghana, Liberia, Nigeria and Sierra Leone, identifying motivators and drivers of corrupt practices and interventions that have been adopted or proposed. Boolean operators were adopted to optimize search outputs and identify relevant studies. Both grey and published literature were identified from Research Gate, Yahoo, Google Scholar, Google and PubMed, and reviewed and synthesized around key domains, with 61 publications meeting our inclusion criteria. The top five most prevalent/frequently reported corrupt practices were (1) absenteeism; (2) diversion of patients to private facilities; (3) inappropriate procurement; (4) informal payments; and (5) theft of drugs and supplies. Incentives for corrupt practices and other manifestations of corruption in the AWA health sector were also highlighted, while poor working conditions and low wages fuel malpractice. Primary research on anti-corruption strategies in health sectors in AWA remains scarce, with recommendations to curb corrupt practices often drawn from personal views and experience rather that of rigorous studies. We argue that a nuanced understanding of all types of corruption and their impacts is an important precondition to designing viable contextually appropriate anti-corruption strategies. It is a particular challenge to identify and tackle corruption in settings where formal rules are fluid or insufficiently enforced.

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.

This article explores the variation in the wage distributions of two Latin American countries, Bolivia and Colombia, which have had different political and economic strategies in recent years. Using data from household surveys, a decomposition of the wage distribution in each country using functional principal component analysis is conducted. The results suggest that Bolivia, which has implemented state-centered policies, has experienced a general increase in wages, especially benefiting the least skilled workers and the informal sector. On the other hand, the wage distribution in Colombia, whose economic policy has leaned towards market-oriented principles, has become more concentrated around the median wage, mainly due to changes in formal sector wages.

Recent literature presents evidence that men are more competitively inclined than women. Since top-level careers usually require competitiveness, competitiveness differences provide an explanation for gender gaps in wages and differences in occupational choice. A natural question is whether women are born less competitive or whether they become so through the process of socialization. To pinpoint when in the socialization process the difference arises, we compare the competitiveness of children in matrilineal and patriarchal societies. We find that while there is no difference at any age in the matrilineal society, girls become less competitive around puberty in the patriarchal society.

In many countries, the structure of wages and the labor law legislation are completely different for public and private sector employees. In this paper, we develop a general equilibrium overlapping generations model to study the effect of such differences on household savings and labor supply. To conduct our analysis, first we use microdata from two Brazilian household surveys to document that civil servants save and work significantly less than their counterparts in the private sector. Second, we use matched employer–employee microdata from Brazil (RAIS) to document differences between the two sectors in terms of wage and unemployment risk. Then, we calibrate the model to be consistent with micro and macro evidence for Brazil. Our counterfactual exercises show that differences in wages characteristics and labor law legislation account for nearly 70% of the gap in savings between civil servants and private sector workers, and 57% of the gap in labor supply. In addition, we find that eliminating those differences can produce sizable increase on aggregate savings, employment, and welfare.