Trade liberalization and informality in Argentina: exploring the adjustment mechanisms

Latin American Economic Review

Table 6 Industry tariffs and wage differentials formal and informal workers OLS and IV estimation

Dep. var.: logarithm of workers’ hourly wages	OLS		IV
Dep. var.: logarithm of workers’ hourly wages	(1)	(2)	(3)	(4)
A) Definition 1: share of small-size firms in industry
= 1 if informal	− 0.153 [0.095]	− 0.112 [0.097]	− 0.082 [0.183]	− 0.129 [0.193]
Log of tariffs	0.034 [0.022]	0.037 [0.022]^*	0.065 [0.069]	0.02 [0.063]
= 1 if informal*Log of tariffs	− 0.005 [0.029]	− 0.025 [0.033]	− 0.368 [0.216]^*	− 0.24 [0.182]
= 1 if informalLog of tariffsS		0.015 [0.018]		0.01 [0.023]
Observations	20661	20661	20661	20661
\(R^2\)	0.38	0.38
B) Definition 2: indicator of small-size industry
= 1 if informal	− 0.153 [0.095]	− 0.122 [0.094]	− 0.082 [0.183]	− 0.204 [0.222]
Log of tariffs	0.034 [0.022]	0.036 [0.022]^*	0.065 [0.069]	0.017 [0.065]
= 1 if informal*Log of tariffs	− 0.005 [0.029]	− 0.021 [0.030]	− 0.368 [0.216]^*	− 0.239 [0.193]
= 1 if informalLog of tariffsS		0.009 [0.009]		0.01 [0.011]
Observations	20661	20661	20661	20661
\(R^2\)	0.38	0.38

Cross-section panel regressions of formal-informal wage differential and industry tariffs. Industry size S defined based on the share of small firms in each industry in 1980 (panel A) and as a dummy indicating small industries in 1980 (panel B). Robust standard errors clustered at the industry-year level in brackets
^* Significant at 10%