Informal Employment and Monthly Wage Earnings : Evidence from Food Processing Firms

This paper examines the determining factors of informal employment and monthly wage income. The empirical analysis applies a conditional mixed-process estimator (CMP) in a simultaneous equation model based on primary survey data collected from face-to-face interviews with employees of formally established firms in the food processing industry. The results show the direct relationship between education and wages, and the inverse relationship between education and informal employment. The findings indicate that attaining higher education levels reduce the probability that individuals will be absorbed into informal employment and increases monthly wage earnings. Policies that support reducing the share of informal employment and disparities in monthly wage earnings would enhance the growth of food processing firms in Rwanda.