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Assessing the loss due to working in the informal sector in Venezuela

Author

Listed:
  • Josefa Ramoni-Perazzi
  • Giampaolo Orlandoni

Abstract

In Venezuela, 40% of the workers are employed in the informal sector. This sector is known for being underproductive, meaning that the income received by its workers is less than what they could earn working in formal sector jobs. This paper uses data from the Household Sample Survey (2012-2013) to estimate differencein-differences linear and quantile regression models, controlling for some demographic characteristics, to quantify the loss associated with working in this market, as an indirect way to quantify the size of the informal sector. The parallel trend assumption is satisfied through propensity score matching, exception made for the highest quartile. The results suggest that informal sector workers lose about 34% of their potential income, loss that is larger for women and with an ambiguous behavior across levels of education. The study also indicates that the average difference in wages between the two sectors tends to narrow over time. Resumen: En Venezuela, el 40% de los trabajadores está empleado en el sector informal. Este sector se caracteriza por baja productividad, lo que implica que el ingreso de los trabajadores que en él se emplean es inferior al que podrían obtener en empleos formales. Este trabajo utiliza datos de la Encuesta de Hogares por Muestreo (2012-2013) para estimar modelos de regresión lineal y por cuantil de diferencia en diferencias, utilizando algunas características demográficas como covariables. Se busca con ello cuantificar la pérdida asociada al trabajo en el sector informal, como una manera indirecta de estimar el tamano del sector. Para satisfacer el supuesto de igual tendencia en los grupos se recurre a procesos de emparejamiento basados en el propensity score; este supuesto no se cumple para el cuantil superior de salarios. Los resultados sugieren que el trabajador del sector informal pierde, en promedio, cerca del 34% de su ingreso potencial, pérdida que es superior en las mujeres que en los hombres, pero sin un claro comportamiento con respecto al nivel educativo. El estudio indica que la diferencia promedio en los sueldos de ambos sectores tiende a reducirse.

Suggested Citation

  • Josefa Ramoni-Perazzi & Giampaolo Orlandoni, 2015. "Assessing the loss due to working in the informal sector in Venezuela," Revista Lecturas de Economía, Universidad de Antioquia, CIE, issue 84, pages 33-58.
    • Handle: RePEc:col:000174:014666
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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