Informal Jobs and Underemployment in Colombia: Two Sides of the Same Coin

Abstract

It is common to analyze deficiencies in employment quality by using the variables informal employment and underemployment. The former term is understood to capture the problem from the company perspective (demand) whereas the latter captures it from the worker perspective (supply). This paper examines how related those variables are to employment quality in the Colombian urban labor market. To do so, the determinants informal employment and underemployment are analyzed together using an econometric model that incorporates the correlation of the terms of error (bivariate probit model). A high correlation was found between the two variables and they, in turn, are related to low income levels, low educational levels, deficient work conditions, and low technological development sectors. This is the first paper on the Colombian labor market that analytically examines informal employment and underemployment together.