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A Taxonomy of Colombia’s Informal Labor Market

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  • Cristina Fernández
  • Leonardo Villar

Abstract

A taxonomy of the informal labor market is extremely important to understand and handle informality, particularly in a country as Colombia where this phenomenon is large and heterogeneous. As we will argue in this paper, it is possible to identify four different types of informality, according to the reasons to be informal: low productivity of the worker (subsistence informality), barriers to formality (induced informality), choice (voluntary informality) and both choice and low productivity (mixed informality). The policy recommendations to handle informality varies according to the target type of informality. While induced informality might be reduced by the removal of formal employment barriers or by the implementation of active policies to reduce segregation in society, structural informality requires other kinds of policies, such as a focus on improving educational outcomes. Similarly, in the case of voluntary informality, providing economic incentives to formalize and controlling informality might be more effective, whereas mixed informality is more related to wrong incentives created by social benefits. In this paper we propose a methodology to identify the four types of informality to the case of Colombia that follows what we did in Fernandez et al. (2016) but with greater emphasis on the education level. Although the correspondence is far from perfect, we show that in general terms, informal workers with primary education or less can be classified in the Subsistence informality group, informal workers with secondary education can be included in the Induced informality group, informal workers with tertiary education or more can be treated as Voluntary informal workers and informal workers with middle school education can cover mixed informality. Hence, the policy recommendations to handle informality among each education group are different.

Suggested Citation

  • Cristina Fernández & Leonardo Villar, 2016. "A Taxonomy of Colombia’s Informal Labor Market," Working Papers Series. Documentos de Trabajo 15227, Fedesarrollo.
  • Handle: RePEc:col:000123:015227
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    Cited by:

    1. Cristina Fernández & Leonardo Villar & Nicol�s G�mez, 2017. "Taxonomía de la informalidad en América Latina," Coyuntura Económica, Fedesarrollo, vol. 47(1 y 2), pages 137-167.
    2. Davidescu, Adriana AnaMaria & Petcu, Monica Aureliana & Curea, Stefania Cristina & Manta, Eduard Mihai, 2022. "Two faces of the same coin: Exploring the multilateral perspective of informality in relation to Sustainable Development Goals based on bibliometric analysis," Economic Analysis and Policy, Elsevier, vol. 73(C), pages 683-705.
    3. Luis E. Arango & Luz A. Flórez & Laura D. Guerrero, 2020. "Minimum wage effects on informality across demographic groups in Colombia," Borradores de Economia 1104, Banco de la Republica de Colombia.
    4. Ham Andrés & Maldonado Darío & Guzmán-Gutiérrez Carlos Santiago, 2021. "Recent trends in the youth labor market in Colombia: Diagnosis and policy challenges," IZA Journal of Labor Policy, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 11(1), pages 1-62, January.
    5. Cristina Fernández, 2019. "Empleo y emprendimiento en Bogotá," Informes de Investigación 17931, Fedesarrollo.
    6. María del Pilar Ruíz & David Forero, 2023. "Estudio de mercado laboral y mapeo de iniciativas para refugiados y migrantes en Bogotá, Facatativá, Soacha, Funza y Mosquera (Cundinamarca) y Barranquilla, Soledad y Malambo (Atlántico)," Informes de Investigación 21034, Fedesarrollo.
    7. Andrés Álvarez & Juan Camilo Chaparro & Carolina Gonz�lez & Santiago Levy & Dar�o Maldonado & Marcela Mel�ndez & Natalia Ram�rez & Marta Juanita Villaveces, 2022. "Reporte ejecutivo de la Misión de Empleo de Colombia," Documentos de trabajo 20156, Escuela de Gobierno - Universidad de los Andes.
    8. Luis E. Arango & Luz A. Flórez, 2017. "Informalidad laboral y elementos para un salario mínimo diferencial por regiones en Colombia," Borradores de Economia 1023, Banco de la Republica de Colombia.
    9. Andrés Ham & Dar�o Maldonado & Carlos Santiago Guzm�n-Guti�rrez, 2019. "Tendencias recientes en la situación laboral de los jóvenes en Colombia: diagnóstico, desafíos y retos de política pública," Documentos de trabajo 17569, Escuela de Gobierno - Universidad de los Andes.
    10. Meer Jan & Amdadullah Baloch & Abdullah Abdulaziz Bawazir & Abdul Qayyum & Mahfoudh Hussein Mgammal, 2024. "Innovation and Path to Inclusiveness in Developing Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 14(5), pages 330-337, September.

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    More about this item

    Keywords

    Informalidad; Nivel educativo; Mercado Laboral; Recomendaciones de política; Colombia;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality

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