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The 'Informality Gap': Can Education Help Minorities Escape Informal Employment? Evidence from Peru

Author

Listed:
  • Delgado Montes, Juan Gabriel

    (Amherst College)

  • Corrales, Javier

    (Amherst College)

  • Singh, Prakarsh

    (Amazon)

Abstract

Discrimination in formal labor markets can push discriminated groups into labor informality, where wages are lower and pensions scarce. In this paper, we explore whether education offsets discrimination by empowering discriminated groups to successfully compete for formal jobs. Specifically, we calculate the returns to education on formal employment for a discriminated group (indigenous Peruvians). We find that certain education levels –primary and tertiary–allow indigenous workers equal access to formal jobs. But, for indigenous workers with only secondary education, we find an "informality trap" where returns to secondary education are 6.7 percentage points lower, a difference larger than the net returns of primary education. We find that differences in education quality across districts, more than migration and industry-specific patterns, are the main drivers of this effect. These findings have policy implications suggesting improvements to quality are essential for secondary education to empower discriminated groups to successfully compete in labor markets.

Suggested Citation

  • Delgado Montes, Juan Gabriel & Corrales, Javier & Singh, Prakarsh, 2016. "The 'Informality Gap': Can Education Help Minorities Escape Informal Employment? Evidence from Peru," IZA Discussion Papers 10389, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp10389
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    Cited by:

    1. Gökçer Özgür & Ceyhun Elgin & Adem Y. Elveren, 2021. "Is informality a barrier to sustainable development?," Sustainable Development, John Wiley & Sons, Ltd., vol. 29(1), pages 45-65, January.
    2. Serdar Acun, 2021. "Türkiye’de Ücretlilerin Kayıtlı Çalışma Olasılığını Belirleyen Faktörlerin Analizi," Journal of Social Policy Conferences, Istanbul University, Faculty of Economics, vol. 0(80), pages 423-450, June.

    More about this item

    Keywords

    exclusion; social security; informal labor markets; education; Latin America;
    All these keywords.

    JEL classification:

    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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