Formal versus Informal Labor Market Segmentation in Iran


Faculty of Economics, University of Tehran, Tehran, Iran


This article examines whether there is a wage gap premium in the formal sector versus the informal sector of the Iranian labor market. We used household survey data conducted by the Statistical Centre of Iran for 2001, 2006, 2011, and 2016 to investigate the characteristics of the informal sector as well as differentials in wage structures between sectors. The findings indicate that a significant part of the Iranian labor force is employed in the informal sector, and this sector shows different behavior from the formal sector in determining wages. It has also been concluded that there is a wage gap between the formal and informal sectors, and this gap after a minimal increase in 2006, narrowed over time.