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Informality and overeducation in the labor market of a developing country

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  • Paula Herrera-Idárraga

    ()
    (AQR – IREA, University of Barcelona, Avda Diagonal, 690, 08034 Barcelona, Spain & Department of Economics, Pontificia Universidad Javeriana, Carrera 7 No. 40 – 62, Bogotá, Colombia.)

  • Enrique López-Bazo

    ()
    (AQR – IREA, University of Barcelona, Avda Diagonal, 690, 08034 Barcelona, Spain & European Commission, Joint Research Center (JRC), Institute for Prospective Technological Studies (IPTS). Calle Inca Garcilaso 3, 41092 Sevilla, Spain.)

  • Elisabet Motellón

    ()
    (AQR – IREA, University of Barcelona, Avda Diagonal, 690, 08034 Barcelona & Universitat Oberta de Catalunya, Avda Tibidabo 39-43, 08035 Barcelona, Spain.)

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 employment choice.

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File URL: http://www.pcb.ub.edu/xreap/aplicacio/fitxers/XREAP2012-20.pdf
File Function: First version, 2012
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File URL: http://www.pcb.ub.edu/xreap/aplicacio/fitxers/XREAP2012-20.pdf
File Function: Revised version, 2012
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Bibliographic Info

Paper provided by Xarxa de Referència en Economia Aplicada (XREAP) in its series Working Papers with number XREAP2012-20.

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Length: 43 pages
Date of creation: Nov 2012
Date of revision: Nov 2012
Handle: RePEc:xrp:wpaper:xreap2012-20

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Postal: Espai de Recerca en Economia, Facultat de Ciències Econòmiques i Empresarials, Universitat de Barcelona, c/ Tinent Coronel Valenzuela, 1-11, 08034 Barcelona
Phone: +34+934039653
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Web page: http://www.pcb.ub.edu/xreap
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Keywords: Segmented labor markets; Formal/Informal employment; Human capital; Economic development;

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