Gender difference of the informal sector wage gap: a longitudinal analysis for the Korean labor market

Unlike previous studies focusing on either market structure or gender earning gap separately, this study considers market structure as a more crucial factor in determining the gender earning gap. The estimated wage differentials between sectors from the fixed-effects (FE) model demonstrate a substantial drop in the size of wage gaps, reflecting systematic sorting between formal and informal sectors by unobserved workers' abilities. While estimated wage differentials from cross-sectional analysis between formal and informal sector among male workers disappear in the FE estimations, the wage gap between the formal and the informal sector among female workers still exists in the FE estimations, thus suggesting a differing dual labor market severity between gender groups. Based on these empirical results, we discuss a policy direction involving simultaneous consideration of the dual structure of the labor market and gender discrimination.