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A cohort-based analysis of the influence of minimum wage levels on labour force participation in the informal sector: Quantitative and substitution effects

Author

Listed:
  • Jhon James Mora

    (Departamento de Economía. Universidad ICESI.)

  • Juan Muro

    (Departamento de Economía, Universidad de Alcalá.)

Abstract

This paper discusses the effect of the minimum wage level on the decision to join the informal job sector. We estimate a pseudo panel of the engagement in the informal sector using an IV-probit. The findings show that an increase in the minimum wage level leads to a substitution effect between young and older workers. This results show that the standards effects over the labor market in the WGM segmented model are moderate because an increase of the minimum wage level does not imply total mobility between sectors.

Suggested Citation

  • Jhon James Mora & Juan Muro, 2010. "A cohort-based analysis of the influence of minimum wage levels on labour force participation in the informal sector: Quantitative and substitution effects," Alcamentos 1001, Universidad de Alcalá, Departamento de Economía..
    • Handle: RePEc:alc:alcamo:1001
    as

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    References listed on IDEAS

    as
    1. Alida Castillo-Freeman & Richard B. Freeman, 1992. "When the Minimum Wage Really Bites: The Effect of the U.S.-Level Minimum on Puerto Rico," NBER Chapters, in: Immigration and the Work Force: Economic Consequences for the United States and Source Areas, pages 177-212, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Jhon James Mora & María Paola Ulloa, 2011. "Calidad del empleo en las principales ciudades colombianas y endogeneidad de la educación," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 13(25), pages 163-177, July-Dece.

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    More about this item

    Keywords

    Informality; minimum wages; instrumental variable probit; pseudo panel; sample selection bias;
    All these keywords.

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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