Informality and Minimum Wages by Cohort in Colombia

Cuadernos de Economía, Vol. 33, No. 63, pp. 469-486, 2014

18 Pages Posted: 29 Apr 2015

See all articles by Jhon James Mora

Jhon James Mora

Universidad Icesi; Universidad ICESI; Universidad ICESI - Economics & Management

Juan Muro

Universidad de Alcalá

Date Written: August 29, 2014

Abstract

This article aims to analyze the effect of minimum wage levels on the decision to join the informal job sector. We estimated a pseudo panel model of engagement in the informal sector using an IV-probit. Our results show that an increased wage gap — the relative difference between observed and minimum wage — has not only a disincentive effect on the probability of joining informality, but also leads to a substitution effect between younger and older cohorts.

Keywords: Informality, minimum wages, instrumental variable probit, pseudo panel, sample selection bias.

JEL Classification: C35, J32.

Suggested Citation

Mora Rodriguez, Jhon James and Mora Rodriguez, Jhon James and Mora Rodriguez, Jhon James and Muro, Juan, Informality and Minimum Wages by Cohort in Colombia (August 29, 2014). Cuadernos de Economía, Vol. 33, No. 63, pp. 469-486, 2014 , Available at SSRN: https://ssrn.com/abstract=2599816

Jhon James Mora Rodriguez (Contact Author)

Universidad Icesi ( email )

Calle 18 #122-135
A.A. 25608
Cali
Colombia
5552334 ext 419 (Phone)

HOME PAGE: http://www.icesi.edu.co/~jjmora/

Universidad ICESI ( email )

Calle 18 #122-135
A.A. 25608
Cali
Colombia
5552334 ext 419 (Phone)

HOME PAGE: http://www.icesi.edu.co/~jjmora/

Universidad ICESI - Economics & Management ( email )

Cali
Colombia

Juan Muro

Universidad de Alcalá ( email )

Plaza de la Victoria s/n
Alcala de Henares, Madrid 28802
Spain

HOME PAGE: http://www2.uah.es/juanmuro

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