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A Cohort-Based Analysis of the Influence of Minimum Wage Levels on the Labor Force Participation in the Informal Sector

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  • Jhon James Mora Rodriguez
  • Juan Muro Romero

Abstract

This paper discuses the effect of the minimum wage on the decision to join the informal job sector. We estimated a pseudo panel of the engagement in the informal sector using an IV-probit. The findings show that an increase in the minimum wage leads to a substitution effect between young and older workers. This results show that the standards effects over the labor market in the WGM segmented model are moderate because an increase of the minimum wage doesn´t imply total mobility between sectors.

Suggested Citation

  • Jhon James Mora Rodriguez & Juan Muro Romero, 2010. "A Cohort-Based Analysis of the Influence of Minimum Wage Levels on the Labor Force Participation in the Informal Sector," Borradores de Economía y Finanzas 7141, Universidad Icesi.
    • Handle: RePEc:col:000130:007141
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    Cited by:

    1. Jhon James Mora & María Paola Ulloa, 2011. "Calidad del empleo en las principales ciudades colombianas y endogeneidad de la educación," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 13(25), pages 163-177, July-Dece.

    More about this item

    Keywords

    Informality; minimum wages; instrumental variable probit; pseudo panel; sample selection bias.;
    All these keywords.

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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