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Persistence of informality in a developing country

Author

Listed:
  • Juan Muro

    (Economics Department of Alcala University (Spain);)

  • Jhon James Mora

    (Economics Department of Icesi University (Colombia). Member of Alcametrica at the University of Alcalá and of the Quantitative methods research at Icesi University)

Abstract
Informality is a common phenomenon in developing countries and an unusual one in industrialized countries. The persistence of informal employment is indicative of the impossibility of moving out of this status for a certain period of time. Using pseudo panel data, empirical evidence is presented to show that this phenomenon occurs in a developing country like Colombia where education helps mitigate said persistent occurrence. The authors also present evidence that a minimum salary increase does not only result in increased informality, but also increases the persistence of informality. This kind of evidence can be used for discussing the persistence of informality in other developing countries.

Suggested Citation

  • Juan Muro & Jhon James Mora, 2015. "Persistence of informality in a developing country," OBEGEF Working Papers 042, OBEGEF - Observatório de Economia e Gestão de Fraude;OBEGEF Working Papers on Fraud and Corruption.
    • Handle: RePEc:por:obegef:042
    as

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    File URL: http://www.fep.up.pt/repec/por/obegef/files/wp042.pdf
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    References listed on IDEAS

    as
    1. Jhon James Mora, 2003. "Sheepskin effects and screening in Colombia," Colombian Economic Journal, Universidad Nacional de Colombia, FCE, CID, April.
      • Jhon James Mora, 2003. "Sheepskin effects and screening in Colombia," Colombian Economic Journal, Academia Colombiana de Ciencias Economicas, Colegio Mayor de Nuestra Senora del Rosario, Pontificia Universidad Javeriana, Universidad de Antioquia, Universidad de los Andes, Universidad del Valle, Universidad Externado de Colombia, Universidad Nacional de Colombia, vol. 1(1), pages 95-108, December.
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    3. José Ignacio Uribe García & Carlos Humberto Ortiz Quevedo & Juan Byron Correa Fonnegra, 2006. "¿Cómo deciden los individuos en el mercado laboral? Modelos y estimaciones para Colombia," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 64, pages 59-90, Enero-Jun.
    4. Costas Meghir & Renata Narita & Jean-Marc Robin, 2015. "Wages and Informality in Developing Countries," American Economic Review, American Economic Association, vol. 105(4), pages 1509-1546, April.
    5. Mª Dolores Collado, 1998. "Estimating binary choice models from cohort data," Investigaciones Economicas, Fundación SEPI, vol. 22(2), pages 259-276, May.
    6. Catalina Franco & Johanna Ramos, 2010. "Diferenciales Salariales en Colombia: Un Analisis para Trabajadores Rurales y Jovenes, 2002-2009," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 25(2), pages 91-131, Diciembre.
    7. Edward M. Gramlich, 1976. "Impact of Minimum Wages on Other Wages, Employment, and Family Incomes," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 7(2), pages 409-462.
    8. Adriana Kugler & Maurice Kugler, 2009. "Labor Market Effects of Payroll Taxes in Developing Countries: Evidence from Colombia," Economic Development and Cultural Change, University of Chicago Press, vol. 57(2), pages 335-358, January.
    9. Galvis-Aponte, Luis Armando, 2004. "Integración regional de los mercados laborales en Colombia, 1984-2000," Chapters, in: Meisel-Roca, Adolfo (ed.), Macroeconomía y regiones en Colombia, chapter 5, pages 218-255, Banco de la Republica de Colombia.
    10. Camilo Mondragón-Vélez & Ximena Peña & Daniel Wills, 2010. "Labor Market Rigidities and Informality in Colombia," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2010), pages 65-101, August.
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    12. Carmen Elisa Flórez, 2002. "The Function Of The Urban Informal Sector In Employment," Documentos CEDE 6883, Universidad de los Andes, Facultad de Economía, CEDE.
    13. Jhon James Mora & Juan Muro, 2008. "Sheepskin effects by cohorts in Colombia," International Journal of Manpower, Emerald Group Publishing Limited, vol. 29(2), pages 111-121, May.
    14. Jhon James Mora Rodríguez, 2003. "Las ganancias de tener un título: una aplicación al mercado laboral de Cali, 2000," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 59, pages 59-72, Julio-Dic.
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    More about this item

    Keywords

    Dynamic Informality; Pseudo Panel; Probit Models;
    All these keywords.

    JEL classification:

    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • J81 - Labor and Demographic Economics - - Labor Standards - - - Working Conditions
    • J88 - Labor and Demographic Economics - - Labor Standards - - - Public Policy

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