Labor Market Rigidities and Informality in Colombia
Informality is at the center of the economic debate in Colombia, fueled by the high level prevalent in the country and its substantial increase during the 1990s. We study the effect of labor market rigidities, namely the increase in non-wage costs and the minimum wage on the size of the informal sector, the transition into and out of informality, and wages. Our results indicate that rises in non-wage costs and the minimum wage, increase the probability of transition into informality as well as the size of the informal sector. The analysis of these effects along the income distribution points towards strong exclusion motives for low skilled informal workers, mainly driven by labor demand adjustments in response to increasing hiring costs; and argues somehow in favor of exit motives for workers at the top of the wage distribution. Furthermore, there is strong indexation of salaries to the minimum wage, except for low skilled informal workers. In addition, firms adjust salaries in response to increasing non-wage costs for all workers within the labor force.
|Date of creation:||31 Jan 2010|
|Contact details of provider:|| |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- William Maloney & Jairo Mendez, 2004.
"Measuring the Impact of Minimum Wages. Evidence from Latin America,"
in: Law and Employment: Lessons from Latin America and the Caribbean, pages 109-130
National Bureau of Economic Research, Inc.
- Maloney, William F. & Nunez, Jairo & Cunningham, Wendy & Fiess, Norbert & Montenegro, Claudio & Murrugarra, Edmundo & Santamaria,Mauricio & Sepulveda, Claudia, 2001. "Measuring the impact of minimum wages : evidence from Latin America," Policy Research Working Paper Series 2597, The World Bank.
- William F. Maloney & Jairo Nunez Mendez, 2003. "Measuring the Impact of Minimum Wages: Evidence from Latin America," NBER Working Papers 9800, National Bureau of Economic Research, Inc.
- Maloney, William F., 2004. "Informality Revisited," World Development, Elsevier, vol. 32(7), pages 1159-1178, July.
- Maloney, William, 2003. "Informality revisited," Policy Research Working Paper Series 2965, The World Bank.
- Fortin, Bernard & Marceau, Nicolas & Savard, Luc, 1997. "Taxation, wage controls and the informal sector," Journal of Public Economics, Elsevier, vol. 66(2), pages 293-312, November.
- Camilo Mondragón-Vélez & Ximena Peña, 2010. "Business Ownership and Self-Employment in Developing Economies: The Colombian Case," NBER Chapters, in: International Differences in Entrepreneurship, pages 89-127 National Bureau of Economic Research, Inc.
- Ximena Peña Parga & Camilo Mondragón-Vélez, 2008. "Business Ownership and Self-Employment in Developing Economies: The Colombian Case," DOCUMENTOS CEDE 004672, UNIVERSIDAD DE LOS ANDES-CEDE.
- Josh Lerner & Antoinette Schoar, 2010. "International Differences in Entrepreneurship," NBER Books, National Bureau of Economic Research, Inc, number lern08-2, April.
- Daniel Mejía & carlos Esteban Posada, "undated". "Informalidad: teoría e implicaciones de política," Borradores de Economia 455, Banco de la Republica de Colombia.
- Daniel Mejía & Carlos Esteban Posada, 2007. "Informalidad: teoría e implicaciones de política," BORRADORES DE ECONOMIA 004024, BANCO DE LA REPÚBLICA.
- Kristensen, Nicolai & Cunningham, Wendy, 2006. "Do minimum wages in Latin America and the Caribbean matter ? Evidence from 19 countries," Policy Research Working Paper Series 3870, The World Bank.
- Bernal Raquel, 2009. "The Informal Labor Market in Colombia: identification and characterization," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE, September.
- Michael J. Pisani & JosÃ© A. Pagán, 2004. "Self-employment in the era of the new economic model in Latin America: a case study from Nicaragua," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 16(4), pages 335-350, July.
- Wendy Cunningham, 2007. "Minimum Wages and Social Policy : Lessons from Developing Countries," World Bank Publications, The World Bank, number 6760, February. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:col:000089:006717. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Universidad De Los Andes-Cede)
If references are entirely missing, you can add them using this form.