The 'Informality Gap': Can Education Help Minorities Escape Informal Employment? Evidence from Peru

61 Pages Posted: 5 Dec 2016

See all articles by Juan Delgado Montes

Juan Delgado Montes

Amherst College

Javier Corrales

Amherst College

Prakarsh Singh

Amherst College - Department of Economics

Abstract

Discrimination in formal labor markets can push discriminated groups into labor informality, where wages are lower and pensions scarce. In this paper, we explore whether education offsets discrimination by empowering discriminated groups to successfully compete for formal jobs. Specifically, we calculate the returns to education on formal employment for a discriminated group (indigenous Peruvians). We find that certain education levels – primary and tertiary – allow indigenous workers equal access to formal jobs.But, for indigenous workers with only secondary education, we find an "informality trap" where returns to secondary education are 6.7 percentage points lower, a difference larger than the net returns of primary education. We find that differences in education quality across districts, more than migration and industry-specific patterns, are the main drivers of this effect. These findings have policy implications suggesting improvements to quality are essential for secondary education to empower discriminated groups to successfully compete in labor markets.

Keywords: exclusion, social security, informal labor markets, education, Latin America

JEL Classification: E26, J46, I26, H55, J71

Suggested Citation

Delgado Montes, Juan and Corrales, Javier and Singh, Prakarsh, The 'Informality Gap': Can Education Help Minorities Escape Informal Employment? Evidence from Peru. IZA Discussion Paper No. 10389. Available at SSRN: https://ssrn.com/abstract=2879796

Juan Delgado Montes (Contact Author)

Amherst College ( email )

Amherst, MA 01002
United States

Javier Corrales

Amherst College

Prakarsh Singh

Amherst College - Department of Economics ( email )

P.O. Box 5000
Amherst, MA 01002-5000
United States
413-542-2271 (Phone)

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