An empirical exploration of geographic heterogeneities in labor markets informality and minimum wage effects

Dual labor markets, defined by the existence or not of a formal labor contract, are a widespread feature in developing countries. Part of this duality results from marked asymmetries between relevant groups and categories, given one-size-fits-all regulation. This article proposes an exploration of the relationship between informality and the minimum wage as a potential source of variation for the identification heterogeneous effects between regions in Argentina. The results obtained support the existence of heterogeneities in policy effects between the central and peripheral regions. The distribution of wages and the level of compliance with the associated minimum wage regulations are the main variables of interest; both exhibit differential effects across regions, stronger northern agglomerations. These are robust to various specifications and controls associated with interregional differences (educational levels, size of companies, sectoral differences, among others). Results have important implications given persistent regional backwardness, and heterogeneities in terms of the workings of both markets and related policies.

Dual Labor Markets Revisited

This article provides an overview of empirical and theoretical research on dual labor markets. It revisits the labor-market effects of dual employment protection legislation as well as the main factors behind its resilience. Characterized by a high incidence of temporary contracts, which may lead to stepping-stone or dead-end jobs, dual labor markets exhibit specific features regarding the determination of employment, unemployment, churn, training, productivity growth, wages, and labor market flows. Relying on the contrasting experiences of several OECD countries with different degrees of duality and, in particular, on the very poor employment performance of some EU countries during the Great Recession, lessons are drawn about policy-reform strategies aiming to correct the inefficiencies of dual labor markets.