RF Estimating involuntary informal employmen

Abstract

The informal employment literature suggest the coexistence of involuntary and voluntary informal employment within the informal labor force. Empirically, only a few studies have attempted the identification of such segments while assuming a Roy model framework of wage maximization. We fill this gap by introducing a Gronau model framework where individuals maximize an inner utility that depends on consumption and time allocated to home activities. The econometric model is a bivariate finite mixture model that we apply over a sample of the Peruvian labor force. We find evidence in favor of the coexistence view, where most, yet not all, of informal employment is involuntary. Keywords: Finite mixture, Informal employment, labor segmentation, Peru. Preprint


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Project leader: Jorge Davalos

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