Labor Informality: Choice or Sign of Segmentation? A Quantile Regression Approach at the Regional Level for Colombia

Abstract

The labor market in developing countries is remarkably heterogeneous, with a small productive formal sector characterized by high wages and attractive employment conditions, and a large informal sector characterized by low productivity and volatile wages. The informal sector is particularly diverse. In this paper, we examine the heterogeneity of the informal sector at the regional level in Colombia. In general, our findings suggest that both voluntary and involuntary informal employment co-exist by choice and as a consequence of labor market segmentation. We also find that there are striking differences in labor market characteristics across cities, particularly with respect to informal employment.

Agglomeration economies in the presence of an informal sector: the Colombian case

“…We calculated the informality rate using the productivity definition and found that it is approximately six percentage points lower than the rate calculated based on the legalistic definition, which is consistent with the results of previous studies that compare different measures of informality in Colombia (see,Bernal, 2009;Galvis, 2012;García, 2017).16 On average, 67% of informal workers are self-employed.17 Low-educated workers are those workers with less than a secondary school education, that is, we excluded professionals and technicians. Low-educated self-employed informal workers represent 59% of the total informal workers in our sample.…”

“…Furthermore, formal workers work in medium-large enterprises that can obtain greater benefits from labor market pooling and input sharing associated with agglomeration (Rosenthal and Strange, 2008b). On the other hand, informal workers are characterized by a limited education, and they tend to work in very small enterprises (Perry et al, 2007;Jütting and De Laiglesia, 2009;García, 2017;García and Badillo, 2017), which might imply that the workers are less able to absorb new knowledge, while the activities of small enterprises tend to be geared toward small local markets more than toward generating input-output linkages (Moreno-Monroy and García, 2016).…”

“…These regions are composed of the following departments (capital city in parentheses): Central region: Bogotá, Antioquia (Medellín), Caldas (Manizales), Quindío (Armenia), Risaralda (Pereira), and Tolima (Ibagué); Eastern region: Boyacá (Tunja), Norte de Santander (Cúcuta), and Santander (Bucaramanga); Western region: Cauca (Popayán), Choco (Quibdó), Huila (Neiva), Nariño (Pasto), and Valle (Cali); Caribbean region: Atlántico (Barranquilla), Bolivar (Cartagena), Cesar (Valledupar), Córdoba (Montería), La Guajira (Riohacha), Magdalena (Santa Marta), Sucre (Sincelejo); Orinoco region: Caquetá (Florencia) and Meta (Villavicencio). A more detailed description of these regions can be found inGalvis (2001),Barón (2002), andGarcía (2017).…”

“…According toArango and Bonilla (2015) andGarcía (2017), Bogotá accounts for approximately 17% of the country's total population, 25% of its total employment, and 25% of its GDP.…”

Análisis espacial de la informalidad laboral intraurbana en Medellín

“…En términos de las variables explicativas, se observa que el coeficiente asociado al porcentaje de mujeres es positivo y altamente significativo, indicando que un incremento en la proporción de mujeres de 10% genera un incremento en los niveles de informalidad de 7,5%. Esto es consistente con la evidencia encontrada en otros estudios donde las mujeres son más propensas a ubicarse en la informalidad debido posiblemente a procesos de discriminación laboral (Uribe y Ortiz, 2006;García, 2017;García y Badillo, 2017), por lo que aquellas regiones con mayor proporción de mujeres presentan mayores niveles de informalidad.…”