Analysis of the Formal/Informal Wage Inequalities in Colombia: A Semiparametric Approach

2020 ◽  
pp. 193672442097534
Author(s):  
Josefa Ramoni-Perazzi ◽  
Giampaolo Orlandoni-Merli
Keyword(s):  
Informal Sector ◽  
Comparative Advantage ◽  
Wage Gap ◽  
Kernel Density ◽  
Household Survey ◽  
Density Functions ◽  
Formal Sector ◽  
Semiparametric Approach ◽  
Informal Sector Worker ◽  
Wage Inequalities

Informality is a common problem in Colombia, with almost 50 percent of the workers employed in this sector. This may be a solution for unemployment, but it is a lose/lose game unless the individuals have a comparative advantage in the informal sector. This article uses information from the Colombian Great Integrated Household Survey (GIHS) to analyze the wage gap between formal and informal urban sectors in two different periods, 2008:4 and 2017:4, using a semiparametric approach. Kernel density functions by groups are estimated; counterfactuals are generated by weighting wages of informal sector workers by their probability of working in the formal sector, to estimate how much an informal sector worker could make if treated as formal, according to his characteristics. The results indicate that only some groups (self-employed and some entrepreneurs) are better off if formalized.

scholarly journals Services Trade: The Great Gender Equaliser?

2021 ◽  
pp. 001573252110118
Author(s):  
Louise Johannesson ◽  
Hildegunn Kyvik Nordås
Keyword(s):  
Comparative Advantage ◽  
Gender Wage Gap ◽  
Wage Gap ◽  
Labour Force ◽  
Labour Force Participation ◽  
Formal Sector ◽  
Services Trade ◽  
Jel Codes ◽  
Formal Employment ◽  
Women In India

Standing at 24% in 2018, India’s female labour force participation is only half of the global average (48%). At the same time, India has one of the widest gender wage gaps in the world and women are less likely to be employed in the formal sector compared to men. This article focuses on how international trade affects relative wages and formal employment between men and women in India. Using the Revealed Symmetrical Comparative Advantage index, sectors of comparative advantage and disadvantage are identified and matched to Indian labour force surveys that contain information on sectoral employment and earnings. We find that sectors of comparative advantage in services have the lowest gender wage gap, with women earning 24% less than their male counterparts, while women in manufacturing earned on average 40% less than male workers. Using the Oaxaca–Blinder decomposition, we find that the total gender wage gap in sectors of comparative advantage in services are minor while it is quite substantial in manufacturing, regardless of comparative advantage status. The article concludes that services trade goes hand in hand with a smaller gender wage gap as women leverage their skills better in services than in manufacturing. JEL Codes: F16, F14

scholarly journals Wage Difference Between Formal Sector and Informal Sector Jobs; With Special Reference to the Labour Market in Sri Lanka

2021 ◽  
Vol 7 (3) ◽  
pp. 7-19
Author(s):  
Bharatha Prabath Parakrama Badullahewage ◽  
Shohani Upeksha Badullahewage
Keyword(s):  
Labour Market ◽  
Informal Sector ◽  
Wage Gap ◽  
Labour Force ◽  
Secondary Data ◽  
Equal Opportunities ◽  
Formal Sector ◽  
Dummy Variable ◽  
Basic Model ◽  
Formal And Informal Sectors

It is globally understood that wage-based employment structure and wages are a central aspects of the labour force at work. The informal sector is ranging to a broader concept that is difficult to define. The formal–informal wage gap is crucial to understand labour market informality, especially in developing countries with the large informal sectors. The basic model is taken from Mincer (1974), and the study is primarily based on secondary data. The new dummy variable of Job_type and an interactive term were incorporated into the Mincer earning function to analyse wage differences between formal sector and informal sector jobs. The study concludes that there is a wage gap between the a formal and informal sector. Moreover, if a person engages in formal sector job with good education qualification and good working experience, he will be entitled for a higher wage rate. Policies that promote education and equal opportunities for workers in both formal and informal sectors would improve earnings for many workers by increasing productivity and incomes.

Investment and wage gap in India: a general equilibrium analysis

2018 ◽  
Vol 11 (2) ◽  
pp. 107-135 ◽  
Author(s):  
Subhasankar Chattopadhyay
Keyword(s):  
General Equilibrium ◽  
Informal Sector ◽  
Developing Economies ◽  
Wage Gap ◽  
Equilibrium Analysis ◽  
Formal Sector ◽  
Content Type ◽  
Development Literature ◽  
Capital Intensive ◽  
Specific Capital

Purpose This paper aims to theoretically find out whether investments could close the formal-informal wage gap in India. Design/methodology/approach The paper builds a general equilibrium model of a developing economy with a large informal sector and a capital-intensive formal sector with sector-specific capital and incorporates endogenous demand. Findings With homothetic preferences, a small initial wage premium and elastic relative demand, investment in the formal sector is likely to close the wage gap, but the gap persists with non-homothetic preferences. However, investment in the informal sector is unlikely to close the wage gap with either type of preferences. Originality/value Though labour market distortions in developing economies leading to a formal-informal wage gap are well-documented in the development literature, little attention has been given to the question of whether such a gap would close over time.

Economic Reforms in Jamaica

1996 ◽  
Vol 38 (2-3) ◽  
pp. 97-108 ◽  
Author(s):  
Anders Danielson
Keyword(s):  
Exchange Rate ◽  
Informal Sector ◽  
Budget Deficit ◽  
Economic Reforms ◽  
The Political ◽  
Rural Poor ◽  
Slow Response ◽  
Formal Sector ◽  
Paper Briefly ◽  
The Past

AbstractThis paper briefly discusses the economic reforms that have taken place in Jamaica for the past 15 years and argues that the reforms, at least so far, are mixed, particularly with regard to the elimination of poverty. The basic problems are (1) a slow response of exports to large, frequent adjustments in the exchange rate, which prohibits low-wage labor, in the informal sector, from being absorbed into the formal sector; and (2) the large budget deficit, with the associated demands for large cuts in expenditures, which primarily affects the rural poor. It is suggested that the principal reason that reforms have been slow is because of the political price to be paid for unpopular measures in a competitive democracy

scholarly journals Informality and Economic Growth in Nigeria: 1980-2014

2017 ◽  
Vol 3 (3) ◽  
pp. 405 ◽  
Author(s):  
Mohammed Yelwa ◽  
A. J. Adam
Keyword(s):  
Economic Growth ◽  
Informal Sector ◽  
Informal Economy ◽  
Data Series ◽  
Formal Sector ◽  
Female Population ◽  
Demand Deposit ◽  
The Impact ◽  
Adf Test ◽  
The Relationship

<p><em>The paper examines the impact of informal sector activities on economic growth in Nigeria between 1980-2014. The contributions of informal sector activities to the growth of Nigerian economy cannot be over emphasized. It is the source of livelihood to the majority of poor, unskilled, socially marginalized and female population and is the vital means of survival for the people in the country lacking proper safety nets and unemployment insurance especially those lacking skills from formal sector jobs. The relationship between informality and economic growth is not clear because the sector is not regulated by the law also there is no concrete evidence that this sector enhances growth because the sector’s contributions to growth is not measured. The use of endogenous growth model becomes relevant in this study. The theory emphasizes the role of production on the long-run via a higher rate of technological innovation. The variables that were tested are official economy nominal GDP, informal economy nominal GDP, currency in circulation, demand deposit, ratio of currency in circulation to demand deposit, narrow money, informal economy as percentage of official economy. ADF test was conducted to establish that the data series of all variables are stationary t levels. Having established the stationarity test we also, conducted causality test of the response of official economy nominal GDP to informal economy nominal GDP. In conclusion, the impact of informal sector economy on economic growth in Nigeria is quiet commendable. Even though, the relationship between informality and economic growth is not straight. The paper recommended thus, the need for the government to integrate the activities of the informal economy into formal sector and size of the sector is measured and regulated because their roles are commendable. As it will improve tax collection and enhance fiscal policy.</em></p>

scholarly journals Is formal employment sector hereditary? Determinants of formal/informal sector choice for Mexican male workers

2019 ◽  
pp. 91-121
Author(s):  
Adelaido García-Andrés ◽  
Ernesto Aguayo-Téllez ◽  
Jose N. Martínez
Keyword(s):  
Positive Selection ◽  
Social Mobility ◽  
Informal Sector ◽  
Formal Sector ◽  
Strong Connection ◽  
Employment Sector ◽  
Formal Employment ◽  
Selection For ◽  
The Relationship ◽  
Employment Choices

Understanding the relationship between parents’ and sons’ formal employment is essential for promoting social mobility in Mexico. Using the 2011 Survey of Social Mobility in Mexico (EMOVI), this paper contributes to the literature by addressing the intergenerational mobility of employment. Findings show a strong connection between intergenerational employment choices and suggest a positive selection for workers. Individuals with parents who worked in the formal sector are more likely to be enrolled in formal work and vice versa. Also, after controlling for parent’s employment sector, schooling remains as a significant vehicle to transit to the formal sector.

scholarly journals Does Education and Experience Matter in the Distribution of Wages in Nepal? A Quantile Regression Approach

2019 ◽  
pp. 1-14
Author(s):  
Pujan Adhikari ◽  
Kishor KC ◽  
Siddha Raj Bhatta
Keyword(s):  
Quantile Regression ◽  
Informal Sector ◽  
Wage Structure ◽  
Maximum Effect ◽  
Formal Sector ◽  
Market Returns ◽  
Agriculture Sector ◽  
Wage Returns ◽  
Return To Schooling ◽  
Experience Effect

 Labor market returns depend on the level of education as well as experience of the labors. Though education is argued to be the key determinant of wage rate, other factors such as the sector of employment, gender of the employee, marital status and work industry also matter. This paper investigates the returns from years of schooling and experience by examining the wage structure in formal, informal and agriculture sectors of Nepal. The Mincerion wage equation and quantile regression technique has been used to analyze such impact by utilizing the recent labor force survey data of Nepal. Our results show that wage returns are positively associated with schooling in all the three sectors. However, return to experience has negative association in case of agriculture sector. Furthermore, return to schooling has higher impact at higher quantile along with the distribution of wages in formal sector and informal sector. The maximum effect of education is 4 percent at 0.90 quantile in formal sector. An additional year of experience has high impact at lower-wage group in case of informal and formal sector. The effect varies from 9.2 percent at 0.1 quantile and 4.9 percent at 0.9 quantile in formal sector. The experience effect is higher at median (4.06 percent) in case of informal sector.

scholarly journals Log-Transform Kernel Density Estimation of Income Distribution

2016 ◽  
Vol 91 (1-2) ◽  
pp. 141-159 ◽  
Author(s):  
Arthur Charpentier ◽  
Emmanuel Flachaire
Keyword(s):  
Income Distribution ◽  
Density Estimation ◽  
Kernel Density Estimation ◽  
Kernel Density ◽  
Estimation Methods ◽  
Density Functions ◽  
Income Distributions ◽  
Heavy Tailed Distributions ◽  
Heavy Tailed ◽  
Positive Support

Standard kernel density estimation methods are very often used in practice to estimate density functions. It works well in numerous cases. However, it is known not to work so well with skewed, multimodal and heavy-tailed distributions. Such features are usual with income distributions, defined over the positive support. In this paper, we show that a preliminary logarithmic transformation of the data, combined with standard kernel density estimation methods, can provide a much better fit of the density estimation.

Neo-Dualism: Accumulation, Distress, and Proliferation of a Fissured Informality

2021 ◽  
pp. 048661342110121
Author(s):  
Kasturi Sadhu ◽  
Saumya Chakrabarti
Keyword(s):  
Informal Sector ◽  
Informal Economy ◽  
Growth Process ◽  
Jel Classification ◽  
Formal Sector ◽  
Firm Level ◽  
Macro Model ◽  
Long Run ◽  
Level Data ◽  
Firm Level Data

A dominant strand of orthodoxy argues that the problem of the informal sector could be mitigated through the capitalistic growth process. But our observations on India are different—with an expansion of the capitalistic formal sector, as the economy grows, there is a proliferation of fissured informality. Using a structuralist macro-model, we provide certain explanations for this phenomenon, which are also tested empirically using Indian subnational-state and firm-level data. Thus, we explore both the short- and long-run effects of the expansion of the formal sector on the heterogeneous informal economy. While a section of the population is pulled into the advanced informal activities, a vast segment is pushed to petty production. Accordingly, the orthodox transition narrative is questioned and alternative policy and political possibilities are introduced. JEL Classification: O11, O13, O17, P48

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