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Is the Wage Curve Formal or Informal? Evidence for Colombia

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Author Info

  • Ramos, Raul

    ()
    (University of Barcelona)

  • Duque, Juan Carlos

    ()
    (Universidad EAFIT)

  • Surinach, Jordi

    ()
    (University of Barcelona)

Abstract

The objective of this paper is to analyse the existence or not of a wage curve in Colombia, paying special attention to the differences between formal and informal workers, an issue that has been systematically ignored in the wage curve literature. The obtained results using microdata from the Colombian Continuous Household Survey (CHS) between 2002 and 2006 show the existence of a wage curve with a negative slope for the Colombian economy. Using information on metropolitan areas, the estimates of the elasticity of individual wages to local unemployment rates was -0.07, a value that is very close to those obtained for other countries. However, the disaggregation of statistical information for formal and informal workers has shown significant differences among both groups of workers. In particular, for the less protected groups of the labour market, informal workers (both men and women), a high negatively sloped wage curve was found. This result is consistent with the conclusions from efficiency wage theoretical models and should be taken into account when analysing the functioning of regional labour markets in developing countries.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4461.

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Length: 15 pages
Date of creation: Oct 2009
Date of revision:
Publication status: published in: Economics Letters, 2010, 109 (2), 63-65
Handle: RePEc:iza:izadps:dp4461

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Keywords: wage curve; formal and informal sectors; unemployment;

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References

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  1. Olivier Blanchard & Lawrence F. Katz, 1997. "What We Know and Do Not Know about the Natural Rate of Unemployment," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 11(1), pages 51-72, Winter.
  2. Maloney, William, 2003. "Informality revisited," Policy Research Working Paper Series 2965, The World Bank.
  3. Janine Berg & Dante Contreras, 2002. "Political-Economic Regime and the Wage Curve: Evidence from Chile, 1957-96," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 2002-10, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
  4. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, Elsevier, vol. 32(3), pages 385-397, August.
  5. David G. Blanchflower & Andrew J. Oswald, 1989. "The Wage Curve," NBER Working Papers 3181, National Bureau of Economic Research, Inc.
  6. David Card, 1995. "The Wage Curve: A Review," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 285-299, June.
  7. Marisa Carla Bucheli Anaya & Cecilia González Rodríguez-Villamil, 2012. "An estimation of the wage curve for Uruguay," REVISTA CUADERNOS DE ECONOMÍA, UN - RCE - CID, UN - RCE - CID.
  8. Peter Nijkamp & Jacques Poot, 2002. "The Last Word on the Wage Curve?," Tinbergen Institute Discussion Papers 02-029/3, Tinbergen Institute, revised 13 Mar 2003.
  9. G Johnes, 2005. "The wage curve revisited: estimates from a UK panel," Working Papers 573979, Lancaster University Management School, Economics Department.
  10. David Castro Lugo, 2006. "Curva salarial: una aplicación para el caso de México, 1993-2002," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 21(2), pages 233-273.
  11. David G. Blanchflower & Andrew J. Oswald, 2005. "The Wage Curve Reloaded," NBER Working Papers 11338, National Bureau of Economic Research, Inc.
  12. Sanz-de-Galdeano, Anna & Turunen, Jarkko, 2006. "The euro area wage curve," Economics Letters, Elsevier, Elsevier, vol. 92(1), pages 93-98, July.
  13. Bratsberg, Bernt & Turunen, Jarkko, 1996. "Wage curve evidence from panel data," Economics Letters, Elsevier, Elsevier, vol. 51(3), pages 345-353, June.
  14. Janssens, Stefan & Konings, Jozef, 1998. "One more wage curve: the case of Belgium," Economics Letters, Elsevier, Elsevier, vol. 60(2), pages 223-227, August.
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Cited by:
  1. Marisa Carla Bucheli Anaya & Cecilia González Rodríguez-Villamil, 2012. "An estimation of the wage curve for Uruguay," REVISTA CUADERNOS DE ECONOMÍA, UN - RCE - CID, UN - RCE - CID.
  2. Jaume Belles-Sampera & Montserrat Guillén & Miguel Santolino, 2013. "“Beyond Value-at-Risk: GlueVaR Distortion Risk Measures”," IREA Working Papers, University of Barcelona, Research Institute of Applied Economics 201302, University of Barcelona, Research Institute of Applied Economics, revised Feb 2013.
  3. Jordi López-Tamayo & Vicente Royuela & Jordi Suriñach, 2012. "“Building a “quality in work” index in Spain”," IREA Working Papers, University of Barcelona, Research Institute of Applied Economics 201206, University of Barcelona, Research Institute of Applied Economics, revised Feb 2012.
  4. M. Ali Choudhary & Saima Mahmood & Sajawal Khan & Waqas Ahmed & Gylfi Zoega, 2013. "Sticky Wages in a Developing Country: Lessons from Structured Interviews in Pakistan," School of Economics Discussion Papers, School of Economics, University of Surrey 0213, School of Economics, University of Surrey.
  5. Badi H. Baltagi & Yusuf Soner Baskaya & Timur Hulagu, 2013. "How different are the wage curves for formal and informal workers? Evidence from Turkey," Papers in Regional Science, Wiley Blackwell, vol. 92(2), pages 271-283, 06.
  6. Yusuf Soner Baskaya & Timur Hulagu, 2011. "Informal-Formal Worker Wage Gap in Turkey : Evidence From A Semi-Parametric Approach," Working Papers 1115, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  7. Hector Elias Gutierrez Rufrancos, 2012. "The Mexican Wage Curve 2000-2003: A Quantile Analysis," Working Paper Series 3412, Department of Economics, University of Sussex.
  8. Luis Eduardo Arango & Nataly Obando & Carlos Esteban Posada, 2011. "Los salarios reales a lo largo del ciclo económico en Colombia," BORRADORES DE ECONOMIA 008950, BANCO DE LA REPÚBLICA.
  9. 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., Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 49(1), pages 99-123, May.
  10. Gustavo Adolfo HERNANDEZ DIAZ, 2011. "Impuestos parafiscales y mercado laboral: Un análisis de Equilibrio General Computable," ARCHIVOS DE ECONOMÍA 008954, DEPARTAMENTO NACIONAL DE PLANEACIÓN.

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