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“Informality and Overeducation in the Labor Market of a Developing Country”

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  • Paula Herrera

    ()
    (Faculty of Economics, University of Barcelona)

  • Enrique López-Bazo

    ()
    (Faculty of Economics, University of Barcelona)

  • Elisabet Motellón

    ()
    (Faculty of Economics, University of Barcelona)

Abstract

In this paper, we explore the connection between labor market segmentation in two sectors, a modern protected formal sector and a traditional- unprotected-informal sector, and overeducation in a developing country. Informality is thought to have negative consequences, primarily through poorer working conditions, lack of social security, as well as low levels of productivity throughout the economy. This paper considers an aspect that has not been previously addressed, namely the fact that informality might also affect the way workers match their actual education with that required performing their job. We use micro-data from Colombia to test the relationship between overeducation and informality. Empirical results suggest that, once the endogeneity of employment choice has been accounted for, formal male workers are less likely to be overeducated. Interestingly, the propensity of being overeducated among women does not seem to be closely related to the sector choice.

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Bibliographic Info

Paper provided by University of Barcelona, Regional Quantitative Analysis Group in its series AQR Working Papers with number 201303.

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Length: 34 pages
Date of creation: Apr 2013
Date of revision: Apr 2013
Handle: RePEc:aqr:wpaper:201303

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Keywords: Segmented labor markets; Formal/Informal employment; Human capital; Economic development. JEL classification: O15; J21; J24.;

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