Informal-formal wage gaps in Colombia

Working Paper 2013-301

Abstract

This document provides recent evidence about the persistency of wage gaps between formal and informal workers in Colombia. The methodology is based on a non-parametric procedure proposed by Nopo (2008a) that allows us to compare labor incomes using matching on variables over a Nationwide Household Survey during 2008-2012. It is found that formal workers earn between 30 to 60 percent more, on average, than informal workers according to the definition of formality adopted and small variations occurs along this period. This is new evidence about the true differences in labor compensation from workers with distinct formality levels in Colombia. These results are important inputs for labor policy in a country with high income inequality levels.

Authors: Nancy Daza, Luis Fernando Gamboa.