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Informality and Overeducation in the Labor Market of a Developing Country

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  • Paula Herrera-Idárraga
  • Enrique López-Bazo
  • Elisabet Motellón

Abstract

In this paper, we explore the connection between labor market segmentation in two sectors, amodern protected formal sector and a traditional- unprotected-informal sector, and overeducation in adeveloping country. Informality is thought to have negative consequences, primarily through poorer workingconditions, lack of social security, as well as low levels of productivity throughout the economy. This paperconsiders an aspect that has not been previously addressed, namely the fact that informality might also affect theway workers match their actual education with that required performing their job. We use micro-data fromColombia to test the relationship between overeducation and informality. Empirical results suggest that, oncethe endogeneity of employment choice has been accounted for, formal male workers are less likely to beovereducated. Interestingly, the propensity of being overeducated among women does not seem to be closelyrelated to the sector choice.

Suggested Citation

  • Paula Herrera-Idárraga & Enrique López-Bazo & Elisabet Motellón, 2013. "Informality and Overeducation in the Labor Market of a Developing Country," Vniversitas Económica 10675, Universidad Javeriana - Bogotá.
  • Handle: RePEc:col:000416:010675
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    File URL: http://cea.javeriana.edu.co/documents/153049/2786252/Vol.13_1_2013.pdf/2a890027-739f-4d82-bbac-6dbd81ffece6
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    Cited by:

    1. Luz A. Flórez & Leidy Gómez D., 2019. "Skill mismatch and labour turnover in a developing country: the Colombian case," Borradores de Economia 1099, Banco de la Republica de Colombia.
    2. Tanthaka Vivatsurakit & Jessica Vechbanyongratana, 2020. "Returns to education among the informally employed in Thailand," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 34(1), pages 26-43, May.
    3. 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.

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    More about this item

    Keywords

    Segmented labor markets; Formal/Informal employment; Human capital; Economic development;
    All these keywords.

    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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