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Labour income inequality and the informal sector in Colombian cities

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  • John Ariza
  • Gabriel Montes-Rojas

Abstract

Labour markets in developing countries are crucial to determine income inequality. In this paper, we use a panel data approach to study the effect of the informal sector on labour income inequality for thirteen cities in Colombia from 2002-2015. We use the rate of underemployment, the average duration of unemployment and the intensity of forced migration from armed conflicts as instruments for the urban informal sector. Results suggest that the informal sector has a positive and statistically significant effect on labour income inequality, which implies that an increase by one percentage point in the informal sector increases the Gini coefficient of labour income by about 0.07. Los mercados de trabajo en países en desarrollo son claves para determinar la desigualdad de ingresos. En este artículo usamos un enfoque de datos de panel para estudiar el efecto de la informalidad laboral sobre la desigualdad de los ingresos laborales para trece ciudades en Colombia durante el periodo 2002-2015. Instrumentamos la tasa urbana de informalidad laboral con la tasa de subempleo, la duración promedio del desempleo y con el flujo de personas de desplazamiento forzado. Los resultados sugieren que la informalidad laboral tiene un efecto positivo y estadísticamente significativo sobre la desigualdad de ingresos laborales. Un aumento de 1 punto porcentual en la tasa de informalidad laboral incrementa el coeficiente de Gini en 0,07.

Suggested Citation

  • John Ariza & Gabriel Montes-Rojas, 2017. "Labour income inequality and the informal sector in Colombian cities," Revista Cuadernos de Economia, Universidad Nacional de Colombia, FCE, CID, vol. 36(72).
    • Handle: RePEc:col:000093:015839
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    References listed on IDEAS

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    Cited by:

    1. Verónica AMARANTE & Rodrigo ARIM, 2023. "Inequality and informality revisited: The Latin American case," International Labour Review, International Labour Organization, vol. 162(3), pages 431-457, September.
    2. John Ariza & Floro Alexander Retajac, 2021. "Composición y evolución de la informalidad laboral en Colombia durante el período 2009-2019," Apuntes del Cenes, Universidad Pedagógica y Tecnológica de Colombia, vol. 40(72), pages 115-148.
    3. Distefano, Tiziano & Saldarriaga Isaza, A. & Morlin, G.S. & Posada Carmona, V. & Villegas Palacio, C.I. & Arango-Aramburo, S., 2025. "The roads towards complex water governance: The Colombian case study," World Development, Elsevier, vol. 188(C).

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