In spite of its predominant economic weight in developing countries, little is known about informal sector income dynamics vis-à-vis the formal sector. Some works have been done in this field using household surveys, but they only consider some emerging Latin American countries (Argentina, Brazil, Colombia and Mexico) and more recently South Africa. As a matter of consequence, there is still no way to generalize these (diverging) results to other part of the developing world, in particular in countries where the informal sector is the most widespread (Sub-Saharan African, and more generally poor countries). Taking advantage of the rich VHLSS dataset in Vietnam, in particular its three waves panel data (2002, 2004, 2006), we assess the formal/informal earnings gaps. We estimate fixed effects and quantile regressions to control for unobserved individual characteristics, focusing particularly on heterogeneity within both the formal and informal sectors. Our results suggest that the informal sector earnings gap highly depends on the workers' job status (wage employment vs. self-employment) and on their relative position in the earnings distribution. Penalties may in some cases turn into premiums. Gender issues are also examined. By comparing our results with studies in other developing countries, we draw some conclusions highlighting the Vietnam's labour market specificity.JEL Classification: J21, J23, J24, J31, O17.

Previous research has shown that in many low and middle income countries micro and small entrepreneurs achieve relative high marginal returns to capital but show only very low reinvestment rates. Existing research is rather inconclusive about the possible causes. We explore whether forced solidarity, i.e. abusive demands by the family and kin hinder entrepreneurs to save and to invest. We start from a relatively simple theoretical model in which households consume and pursue different income generating activities, mainly the production of goods and services and the engagement in dependent wage work outside the household. Value added of the household business is subject to a solidarity tax imposed by the household's wider family and kin-group. In this model a higher solidarity tax leads to a reallocation of productive resources away from household production to other income generating activities and leisure. We use an original data set of West-African migrant entrepreneurs to see whether the empirical observation is consistent with the predictions of the model. We find some evidence that family and kinship structures within the city enhance labour effort and the use of capital. However, closeness to the area of origin seem to have adverse effects on both.