Formal but less equal. Gender wage gaps in formal and informal jobs in urban Brazil

In developing countries, a large share of employees work informally and are not covered by employment protection legislation. I study how gender inequality differs across formal and informal wage-earners in urban Brazil. The raw gender wage gap is about the same on average in informal jobs (5%) as in formal jobs (7%), but I show that this difference is the result of different male and female selection processes. First, female employees have better observable characteristics than male employees, for example in terms of educational attainment. After controlling for observable characteristics, the adjusted gender wage gap is on average about 24% among formal employees and about 20% among informal employees. Second, men and women entering formal and informal jobs have different unobservable characteristics. Controlling for endogenous selection into formal vs. informal jobs, I find that the gender gap in wage offers is high and increases with education in formal jobs. In informal jobs, however, estimated wage offers are the same for men and women. I discuss the potential implications of these findings regarding the effect of labor market regulation on gender wage gaps.