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“Informality and Overeducation in the Labor Market of a Developing Country”

Author

Listed:
  • Paula Herrera

    () (Faculty of Economics, University of Barcelona)

  • Enrique López-Bazo

    () (Faculty of Economics, University of Barcelona)

  • Elisabet Motellón

    () (Faculty of Economics, University of Barcelona)

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 sector choice.

Suggested Citation

  • Paula Herrera & Enrique López-Bazo & Elisabet Motellón, 2013. "“Informality and Overeducation in the Labor Market of a Developing Country”," AQR Working Papers 201303, University of Barcelona, Regional Quantitative Analysis Group, revised Apr 2013.
  • Handle: RePEc:aqr:wpaper:201303
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    References listed on IDEAS

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    Cited by:

    1. Tareq Sadeq, 2014. "Formal-Informal Gap in Return to Schooling and Penalty to Education-Occupation Mismatch a Comparative Study for Egypt, Jordan, and Palestine," Working Papers 894, Economic Research Forum, revised Dec 2014.

    More about this item

    Keywords

    Segmented labor markets; Formal/Informal employment; Human capital; Economic development. JEL classification: O15; J21; J24.;

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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