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Exploring Spatial Wage Curves: Evidence from Colombia’s Formal and Informal Employment
This paper estimates spatial wage curves for formal and informal workers in Colombia, using data from the Colombian Labor Force Survey (GEIH) for the period 2016-2019. Unlike previous Colombian wage curve studies, this analysis uses four diff erent spatial matrices that focus on factors such as contiguity, distance, and intraregional economic activity. In addition, the study calculates informal-formal wage curve di fferentials by gender and education level, while also taking into account characteristics that would a ffect selection into formal and informal employment. Methodologically, the study employs a two-stage least squares (2SLS) approach using the lagged unemployment rate as an instrumental variable. The results show that informal workers, especially males and those with less education, are more sensitive compared to their formal, female and more educated counterparts. The study also shows that spatial spillovers have a positive eff ect on the wages of formal workers, while having a negative impact on informal workers.
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