Do informal workers suffer an earnings penalty? A panel data analysis of earnings gaps in South Africa
Date
2016
Authors
Yu, Katrina
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Abstract
Drawing on data from the National Income Dynamics Survey (NIDS) from 2008-2012, this
paper investigates informal-formal earnings gaps in South Africa in order to assess the
validity of labour market segmentation theories and to shed light on the motivations behind
informal labour. In addition to controlling for observed individual characteristics using pooled
OLS regression, fixed effects and quantile regressions are also estimated to control for
time-invariant individual heterogeneity and to assess variations in earnings gap along the
income distribution. Results are indicative of segmentation both within informal employment
and in the labour market as a whole. Overall, informal employment in South Africa can be
characterised as highly diverse and heterogeneous, with earnings differentials varying by
employment type (whether salaried or self-employed), gender, and level of income. This
earnings analysis is complemented by a brief exploration into the non-pecuniary
characteristics of informal employment, with a consideration of the relationship between
subjective wellbeing and informality.
Description
Thesis (M.Com. (Development Theory and Policy))--University of the Witwatersrand, Faculty of Commerce, Law and Management, School of Economic and Business Sciences, 201