El Badaoui, Eliane; Strobl, Eric; Walsh, Frank - In: Journal of Development Economics 91 (2010) 1, pp. 37-47
We show theoretically that when larger firms pay higher wages and are more likely to be caught defaulting on labor taxes, then large-high wage firms will be in the formal and small-low wage firms will be in the informal sector. The formal sector wage premium is thus just a firm size wage...