nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2012‒03‒14
two papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Informalidad laboral en las áreas urbanas de Colombia By Luis Armando Galvis
  2. The Formal Sector Wage Premium and Firm Size for Self-employed Workers By Olivier Bargain; Eliane El Badaoui; Prudence Kwenda; Eric Strobl; Frank Walsh

  1. By: Luis Armando Galvis
    Abstract: This paper aims to carry out a depiction of labor informality in Colombia. We discuss the different alternatives that have been considered when defining and measuring labor informality and, based on technical criteria, employ the definitions related to the lack of affiliation to social security schemes (healthcare and pensions) and that of DANE for measuring the intensity of informality in the twenty-three major Colombian cities. The results show that when defining informality as the lack of affiliation to social security, nearly six out of ten employees belong to the informal sector. Additionally, informal workers in Colombia are characterized by low educational and income levels, besides from working in smaller establishments, when compared to the formal workers. From a regional perspective, the cities outward to the trapezoid conformed by Bogota, Cali, Medellin and Bucaramanga, the country’s main economic location, have the highest informality rates. RESUMEN: El presente documento tiene por objetivo llevar a cabo una caracterización de la informalidad en Colombia. Se discuten las diferentes alternativas que se han considerado para definir y medir la informalidad y, basado en criterios técnicos, se emplea la definición asociada a la no afiliación a seguridad social (salud y pensión) y la del DANE para medir el nivel de informalidad en las veintitrés principales ciudades del país. Los resultados muestran que, definiendo la informalidad por la falta de aportes a seguridad social, cerca de seis de cada diez empleados se ubicaría en el sector informal. Asimismo, el perfil de los informales en Colombia se caracteriza por presentar bajos niveles educativos, menores niveles de ingreso y se desempeñan en establecimientos de menor tamaño que los trabajadores formales. A nivel regional, los niveles más altos en el grado de informalidad lo presentan ciudades que están por fuera del centro de actividad económica del país, especialmente las ciudades que no se encuentran en el trapecio formado por Bogotá, Cali, Medellín y Bucaramanga.
    Date: 2012–02–28
  2. By: Olivier Bargain (Aix-Marseille School of Economics); Eliane El Badaoui (EconomiX - University Paris 10); Prudence Kwenda (University College Dublin); Eric Strobl (Ecole Polytechnique Paris); Frank Walsh (University College Dublin)
    Abstract: We develop a model where workers may enter self-employment or search for jobs as employees and where there is heterogeneity across workers’ managerial ability. Workers with higher skills will manage larger firms while workers with low managerial ability will run smaller firms and will be in self-employment only when they cannot find a salaried job. For these workers self-employment is a secondary/informal form of employment. The Burdett and Mortensen (1998) equilibrium search model is used for illustration as a special case of our more general framework. Empirical evidence from Mexico is provided and demonstrates that firm size wage effects for employees and selfemployed workers are broadly consistent with the model.
    Keywords: Self-employment, Managerial ability, Informal sector
    Date: 2012–03–05

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