In the last few decades, the informal sector has played a major role in many of the LDC’s
labor markets. Yet, little is known about the dynamics of this sector. This paper addresses an
important question, namely whether informal employment is a stepping stone, as first argued
by economists such as Fields (1975), or is it a dead end? Using evidence from the Egyptian
Labor Market Panel Survey 2006, and controlling for selectivity in informal jobs, we estimate
the probability of “graduating” from informal employment to semi-formal and formal jobs.
The empirical findings suggest that the mobility from informal to semi-formal/formal
employment is highly segmented along education and gender in Egypt. Overall, it seems that
informal employment is a stepping stone for highly educated male workers, but is a dead end
for the uneducated, and for female workers.