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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 Economía, Universidad Nacional de Colombia -FCE - CID, vol. 36(72), October.
  • Handle: RePEc:col:000093:015839
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    References listed on IDEAS

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    1. Maloney, William F., 2004. "Informality Revisited," World Development, Elsevier, vol. 32(7), pages 1159-1178, July.
    2. Luis Armando Galvis A., 2012. "Informalidad laboral en las áreas urbanas de Colombia," Coyuntura Económica, Fedesarrollo, June.
    3. Arim, Rodrigo, 2015. "Desigualdad de las remuneraciones e informalidad: breve revisión de la literatura y marco analítico," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 39643, December.
    4. Berg, Janine, 2010. "Laws or luck? Understanding rising formality in Brazil in the 2000s," MPRA Paper 43608, University Library of Munich, Germany.
    5. Christian Manuel Posso, 2010. "Desigualdad salarial en Colombia 1984-2005: cambios en la composición del mercado laboral y retornos a la educación post-secundaria," Revista Desarrollo y Sociedad, Universidad de los Andes - CEDE, December.
    6. Gasparini Leonardo & Leonardo Tornaroli, 2009. "Labor Informality in Latin America and the Caribbean: Patterns and Trends from Household Survey Microdata," Revista Desarrollo y Sociedad, Universidad de los Andes - CEDE, September.
    7. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 38(2), pages 112-134.
    8. Maurizio, Roxana., 2014. "Labour formalization and declining inequality in Argentina and Brazil in the 2000s a dynamic approach," ILO Working Papers 994855153402676, International Labour Organization.
    9. Chiara Binelli, 2016. "Wage inequality and informality: evidence from Mexico," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-18, December.
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