This study estimates separate selectivity bias corrected wage equations for formal and informal workers in rural and urban Mexico using data from the Mexican Family Life Survey (MxFLS). We control for diff erent potential selection patterns using Probit and Multinominal logit models in the fi rst step in which health, personality traits and family characteristics serve as exclusion restrictions for working per se and working in the formal sector. Oaxaca-Blinder Decompositions show that rural-urban wage inequality in the formal and informal sector is determined by diff erences in observable human capital. In the informal sector, the wage diff erential is mainly explained by diff erences in returns to experience. Furthermore, we analyse rural-to-urban migrants‘ labour market performance. The fi ndings suggest that rural-to-urban migration will continue and the informal sector will further increase.