Labour income inequality and the informal sector in Colombian cities

• Published in: Cuadernos de economía (Bogotá, Colombia) Vol. 36; no. 72; pp. 77 - 98
• Main Authors: Ariza, John, Montes-Rojas, Gabriel
• Format: Journal Article
• Language: English; Portuguese
• Published: Bogota Universidad Nacional de Colombia, Sede Medellin 01.01.2017; Universidad Nacional de Colombia
• Subjects: América Latina; desigualdad de ingreso; Developing countries; Economic models; ECONOMICS; Forced migration; Income inequality; Informal economy; informalidad laboral; Labor market; Latin America; LDCs; occupations; ocupaciones; Panel data; the informal sector; Underemployment; Unemployment; Colombia; Latin America; Amérique latine; América Latina; ocupaciones; the informal sector; informalité du travail; desigualdad de ingreso; occupations; Latin America; Income inequality; inégalité du revenu; ocupações; desigualdade de receita; informalidad laboral; informalidade trabalhista
• ISSN: 0121-4772; 2248-4337
• DOI: 10.15446/cuad.econ.v36n72.65820

Labour markets in developing countries are crucial to determine income inequality. In this paper, we use a panel data approach to study the effect of the informal sector on labour income inequality for thirteen cities in Colombia from 2002-2015. We use the rate of underemployment, the average duration of unemployment and the intensity of forced migration from armed conflicts as instruments for the urban informal sector. Results suggest that the informal sector has a positive and statistically significant effect on labour income inequality, which implies that an increase by one percentage point in the informal sector increases the Gini coefficient of labour income by about 0.07.