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

Labor market conditions improved during the 2000s in Latin America, a process that includes a reduction in the size of informal employment. A decline of wage inequality was another feature of this period. Both dynamics were particularly intense in Argentina. The purpose of this study is to evaluate the role that labor formalization had in Argentina on the fall of earnings inequality, taking also into account other factors that could have contributed to such evolution of the distribution. The method employed is a decomposition proposed by Firpo, Fortin and Lemieux (2007, 2011), which allows extending the Oaxaca-Blinder approach to decompose some distributive statistics of income between a composition effect and a returns effect. Increasing formalization had an equalizing effect over the period, a finding not previously emphasized in the literature.