A cohort-based analysis of the influence of minimum wage levels on labour force participation in the informal sector : quantitative and substitution effects

Authors
Mora, Jhon James; Muro Romero, Juan de DiosUniversity of Alcalá Author
Identifiers
Permanent link (URI): http://hdl.handle.net/10017/7203
Publisher
Universidad de Alcalá. Departamento de Estadística, Estructura Económica y Organización Económica Internacional
Date
2010-06
Bibliographic citation
Alcamentos, N. 1001
Keywords
Informality
Minimum wages
Instrumental variable probit
Pseudo panel
Sample selection bias
Description / Notes
The authors are thankful for the valuable suggestions of Ximena Dueñas and Luisa Fernanda Bernat at Icesi University, and those who attended the IARIW and CLADEA Conferences. Jhon James Mora acknowledges Icesi University and The National Institute of Science and Technology in Colombia (COLCIENCIAS) for their financial assistance. All remaining errors are own
Document type
info:eu-repo/semantics/workingPaper
Access rights
info:eu-repo/semantics/openAccess
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Abstract
This paper discuses the effect of the minimum wage level on the decision to join the informal job sector. We estimate a pseudo panel of the engagement in the informal sector using an IV-probit. The findings show that an increase in the minimum wage level leads to a substitution effect between young and older workers. This results show that the standards effects over the labor market in the WGM segmented model are moderate because an increase of the minimum wage level does not imply total mobility between sectors.
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