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Is the Wage Curve Formal or Informal? Evidence for Colombia

  • Ramos, Raul

    ()

    (University of Barcelona)

  • Duque, Juan Carlos

    ()

    (Universidad EAFIT)

  • Surinach, Jordi

    ()

    (University of Barcelona)

The objective of this paper is to analyse the existence or not of a wage curve in Colombia, paying special attention to the differences between formal and informal workers, an issue that has been systematically ignored in the wage curve literature. The obtained results using microdata from the Colombian Continuous Household Survey (CHS) between 2002 and 2006 show the existence of a wage curve with a negative slope for the Colombian economy. Using information on metropolitan areas, the estimates of the elasticity of individual wages to local unemployment rates was -0.07, a value that is very close to those obtained for other countries. However, the disaggregation of statistical information for formal and informal workers has shown significant differences among both groups of workers. In particular, for the less protected groups of the labour market, informal workers (both men and women), a high negatively sloped wage curve was found. This result is consistent with the conclusions from efficiency wage theoretical models and should be taken into account when analysing the functioning of regional labour markets in developing countries.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4461.

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Length: 15 pages
Date of creation: Oct 2009
Date of revision:
Publication status: published in: Economics Letters, 2010, 109 (2), 63-65
Handle: RePEc:iza:izadps:dp4461
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  1. Janssens, Stefan & Konings, Jozef, 1998. "One more wage curve: the case of Belgium," Economics Letters, Elsevier, vol. 60(2), pages 223-227, August.
  2. Blanchflower, D. & Oswald, A., 1989. "The Wage Curve," Papers 340, London School of Economics - Centre for Labour Economics.
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  8. David G. Blanchflower & Andrew J. Oswald, 2005. "The Wage Curve Reloaded," NBER Working Papers 11338, National Bureau of Economic Research, Inc.
  9. Bratsberg, Bernt & Turunen, Jarkko, 1996. "Wage curve evidence from panel data," Economics Letters, Elsevier, vol. 51(3), pages 345-353, June.
  10. Olivier Blanchard & Lawrence F. Katz, 1996. "What We Know and Do Not Know About the Natural Rate of Unemployment," NBER Working Papers 5822, National Bureau of Economic Research, Inc.
  11. Sanz-de-Galdeano, Anna & Turunen, Jarkko, 2006. "The euro area wage curve," Economics Letters, Elsevier, vol. 92(1), pages 93-98, July.
  12. Maloney, William F., 2004. "Informality Revisited," World Development, Elsevier, vol. 32(7), pages 1159-1178, July.
  13. David Castro Lugo, 2006. "Curva salarial: una aplicación para el caso de México, 1993-2002," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 21(2), pages 233-273.
  14. Peter Nijkamp & Jacques Poot, 2005. "The Last Word on the Wage Curve?," Journal of Economic Surveys, Wiley Blackwell, vol. 19(3), pages 421-450, 07.
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