INFORMAL WORK IN CHILE, VOLUNTARY OPTION OR COMPULSORY CONDITION?
Abstract
This article studies labor informality in Chile, under the hypothesis that this type of activities is heterogeneous, in the sense that they have precarious activities, as an obligatory option, and to those who are opting for an informal work due to benefit-cost considerations.
A formula for measuring labor informality is designed and a method of instrumental variables is used, applied to a selection and treatment model with the presence of essential heterogeneity, where the concept of treatment is assimilated to that of choosing a formal job.
As a result, indications are obtained that people are responding to treatment, based on idiosyncratic gains or rewards, and are revealing a behavioral variation that leads them to choose the mode of work. However, when tested on people in the first socioeconomic quintile, a less conclusive result is obtained and there would be weaker evidence about the presence of barriers to access to formal jobs.
Key words: Chile, informal work, treatment effect, essential heterogeneity.
JEL Classification : C31, E26, O17
https://doi.org/10.21114/rel.2018.02.03
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