Geographical Exclusion in Rural Areas of El Salvador: Its Impact on Labor Market Outcomes

The main objective of this study is to examine one aspect of social exclusion, the geographic isolation of individuals living in El Salvador`s rural areas and its impact on three labor market outcomes: labor force participation decision, sector of employment, and labor income. In this study, it is hypothesized that living in geographic isolation has a negative impact on rural workers` labor outcomes, that geographic isolation, through a combination of security hazards, increasing transaction and working costs, depresses individual`s labor force participation rates, increases the likelihood of working in low-productive jobs, and results in lower labor income levels. The main results of this study indicate that the degree of geographic isolation does not discourage men from working; on the contrary, men living farther away from urban and maquila jobs are more likely to work. The degree of geographic isolation determines individuals` sector allocation and their labor income as well. Women living farther away from urban areas or with less access to paved roads are highly concentrated in own-production agricultural activities, where women`s skills are rewarded less than comparable men`s skills. Own production in agriculture is a sector where women`s human capital accumulation does not influence their income labor level, though it does reward men`s skills. Through concentration into this sector, women living in geographic isolation obtain worse labor outcomes than men. Living in geographic isolation decreases women`s labor income. When working in own-account non-agricultural production, geographic isolation also has a negative impact on men`s labor income.