Recent decline in wage inequality and formalization of the labor market in Argentina

BECCARIA, LUIS; MAURIZIO, ROXANA; VÁZQUEZ, GUSTAVO

International Review of Applied Economics

Taylor & Francis

Año: 2015 vol. 29 p. 677 - 700

0269-2171

Labour market conditions improved during the 2000s in Latin America, aprocess that included a reduction in the magnitude of informal employment. Adecline of wage inequality was another feature of this period. Both dynamicswere particularly intense in Argentina. The purpose of this study is to evaluatethe role played by the process of formalization of the labour market that occurredin Argentina during that period on the reduction of income inequality, whileadditionally taking into account other factors that might have also contributed tosuch dynamics of income inequality. The method employed is a decompositionproposed by Firpo, Fortin and Lemieux, which allows extending the Oaxaca-Blinder approach to decompose some distributive statistics of income between a "composition effect" and a "returns effect". The study concludes that the processof increasing labour market formalization had an equalizing effect over theperiod, a finding that had not been emphasized in previous studies.