Two Cities, Two Economies: Decomposing the Self-Employment Productivity Gap Between Quito and Guayaquil (Ecuador)

This research analyzes the income gap between self-employed workers in Quito and Guayaquil, Ecuador’s two largest urban labor markets. Using 2025 National Survey of Employment, Unemployment, and Underemployment (ENEMDU) data for 23,215 self-employed workers aged 25 to 65, the study combines Mincer regressions, quantile regressions, and Blinder–Oaxaca decomposition. Self-employed workers in Quito have hourly earnings approximately 13.9% higher than those in Guayaquil. The decomposition attributes 46.6% of the log-income gap to differences in observed characteristics, with education accounting for most of the explained component, while 53.4% remains unexplained. The unexplained component reflects differences in estimated coefficients as well as omitted or unobserved factors and should not be interpreted as a causal city effect. Education coefficients are larger in Quito in the city-specific regressions and across most quantiles. The results document substantial territorial heterogeneity in self-employment earnings and support the relevance of place-sensitive labor and entrepreneurship policies, while remaining descriptive rather than causal.