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Is the Wage Curve Formal or Informal? Evidence for Colombia

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  • 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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  1. Marisa Bucheli & Cecilia González, 2007. "An estimation of the wage curve for Uruguay," Documentos de Trabajo (working papers) 1107, Department of Economics - dECON.
  2. 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, vol. 11(1), pages 51-72, Winter.
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  4. 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, vol. 21(2), pages 233-273.
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  6. Maloney, William, 2003. "Informality revisited," Policy Research Working Paper Series 2965, The World Bank.
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  9. David G. Blanchflower & Andrew J. Oswald, 1995. "The Wage Curve," MIT Press Books, The MIT Press, edition 1, volume 1, number 026202375x, December.
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  12. G Johnes, 2005. "The wage curve revisited: estimates from a UK panel," Working Papers 573979, Lancaster University Management School, Economics Department.
  13. Janssens, Stefan & Konings, Jozef, 1998. "One more wage curve: the case of Belgium," Economics Letters, Elsevier, vol. 60(2), pages 223-227, August.
  14. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
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