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The Informal Labor Market in Colombia: identification and characterization

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  • Bernal Raquel

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Abstract

In this paper, we study the extent and nature of informality in Colombia by using the new chapter on informality in the Encuesta Continua de Hogares (ECH) from August 2006 to December 2006, which includes new questions deepening the information on coverage of social protection benefits, labor market trajectories, and motivations for sector of employment. The availability of these new data allows us to measure informality in several ways and understand the differences and implications of using various definitions. We show that social security contributions is a reasonable measure of informality as it is a good indicator that the individual has the entire package of benefits associated with formal employment. We then use this definition of informality to characterize informal workers in various dimensions that include socio-demographic characteristics, characteristics of the firm and job satisfaction measures. The main objective is to understand what types of individuals belong to formal and informal sectors, study the incentives and motivations of workers for belonging to one or other segment of the labor market, and analyze the consequences of not being covered by the regulatory framework. In doing this, we hope to gain some understanding about how different policy interventions could influence individuals´ occupation choices and workers´ well-being. In this paper, we study the extent and nature of informality in Colombia by using the new chapter on informality in the Encuesta Continua de Hogares (ECH) from August 2006 to December 2006, which includes new questions deepening the information on coverage of social protection benefits, labor market trajectories, and motivations for sector of employment. The availability of these new data allows us to measure informality in several ways and understand the differences and implications of using various definitions. We show that social security contributions is a reasonable measure of informality as it is a good indicator that the individual has the entire package of benefits associated with formal employment. We then use this definition of informality to characterize informal workers in various dimensions that include socio-demographic characteristics, characteristics of the firm and job satisfaction measures. The main objective is to understand what types of individuals belong to formal and informal sectors, study the incentives and motivations of workers for belonging to one or other segment of the labor market, and analyze the consequences of not being covered by the regulatory framework. In doing this, we hope to gain some understanding about how different policy interventions could influence individuals´ occupation choices and workers´ well-being.

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Bibliographic Info

Article provided by UNIVERSIDAD DE LOS ANDES-CEDE in its journal REVISTA DESARROLLO Y SOCIEDAD.

Volume (Year): (2009)
Issue (Month): ()
Pages:

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Handle: RePEc:col:000090:005863

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Related research

Keywords: Informality; pension; health; job satisfaction;

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References

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  1. Juan Carlos Echeverry & Mauricio Santamaria, 2004. "The Political Economy Of Labor Reform In Colombia," DOCUMENTOS CEDE 003618, UNIVERSIDAD DE LOS ANDES-CEDE.
  2. Camilo Mondragón-Vélez & Ximena Peña & Daniel Wills, 2010. "Labor Market Rigidities and Informality in Colombia," DOCUMENTOS CEDE 006717, UNIVERSIDAD DE LOS ANDES-CEDE.
  3. Mauricio Cardenas & Raquel Bernal, 2004. "Determinants of Labor Demand in Colombia. 1976–1996," NBER Chapters, in: Law and Employment: Lessons from Latin America and the Caribbean, pages 229-272 National Bureau of Economic Research, Inc.
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Cited by:
  1. Ramon Antonio, Rosales Alvarez & Jorge Andres, Perdomo Calvo & Carlos Andres, Morales Torrado & Jaime Alejandro, Urrego Mondragon, 2009. "Fundamentos de econometría intermedia: Teoría y aplicaciones
    [Intermediate economics: Theory and applications]
    ," MPRA Paper 37183, University Library of Munich, Germany.
  2. Luis Armando Galvis, 2012. "Informalidad laboral en las áreas urbanas de Colombia," DOCUMENTOS DE TRABAJO SOBRE ECONOMÍA REGIONAL 009364, BANCO DE LA REPÚBLICA - ECONOMÍA REGIONAL.
  3. Nancy Daza & Luis Fernando Gamboa, 2013. "Informal-formal wage gaps in Colombia," Working Papers 301, ECINEQ, Society for the Study of Economic Inequality.
  4. Camilo Mondragón-Vélez & Ximena Peña & Daniel Wills, 2010. "Labor Market Rigidities and Informality in Colombia," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  5. International Monetary Fund, 2011. "Unemployment in Latin America and the Caribbean," IMF Working Papers 11/252, International Monetary Fund.
  6. Isabelle Joumard & Juliana Londoño Vélez, 2013. "Income Inequality and Poverty in Colombia - Part 1. The Role of the Labour Market," OECD Economics Department Working Papers 1036, OECD Publishing.
  7. Paola Roldán Vásquez & Carlos Ospino Hernández, 2009. "¿Quiénes terminan en la informalidad?: Impacto de las características y el tiempo de búsqueda," REVISTA DE ECONOMÍA DEL CARIBE, UNIVERSIDAD DEL NORTE.
  8. Javier Armando Pineda & Carlos Eduardo Acosta, 2011. "Calidad Del Trabajo: Aproximaciones Teóricas Y Estimación De Un Índice Compuesto," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE.
  9. Nancy Daza & Luis Fernando Gamboa, 2013. "An approximation to the Informal-formal wage gap in Colombia 2008-2012," DOCUMENTOS DE TRABAJO 010990, UNIVERSIDAD DEL ROSARIO.
  10. Mehling, Maxie-Lina & Boehm, Frédéric, 2014. "Corruption and Informality: Complements or Substitutes? Qualitative Evidence from Barranquilla, Colombia," MPRA Paper 54817, University Library of Munich, Germany.
  11. Gustavo Adolfo HERNANDEZ DIAZ, 2011. "Impuestos parafiscales y mercado laboral: Un análisis de Equilibrio General Computable," ARCHIVOS DE ECONOMÍA 008954, DEPARTAMENTO NACIONAL DE PLANEACIÓN.
  12. Gustavo Hernández, 2012. "Payroll Taxes and the Labor Market: A Computable General Equilibrium Analysis," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 49(1), pages 99-123, May.

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