Are Labour Markets Segmented in Developing Economies? A Clustering Approach for Colombian Workers

David Arturo Rodriguez Guerrero and Jorge Eliecer Quintero
Additional contact information
David Arturo Rodriguez Guerrero: Universidad Externado de Colombia
Jorge Eliecer Quintero: Universidad Externado de Colombia

No 67-93, Ensayos de Economía from Universidad Nacional de Colombia Sede Medellín

Abstract: Labour markets in developing economies are usually thought to be segmented. Differences in productivity, red tape, and high taxes create a divide between a modern and an excluded traditional sector. More recently, some scholars have challenged this view. In this article, we propose to test the segmented markets hypothesis using a clustering method applied to Colombian workers. Following Anderson et al. (1987) we hypothesize that if the first view prevails, the labour market has well-defined worker clusters that our empirical strategy could uncover. Using the FAMD-K-means algorithm we find three clusters: one comprises half the workforce, has workers with secondary education or vocational training, without labour contracts, and median earnings slightly above the minimum wage. The second group comprises 37% of the workforce, older workers with even lower earnings and educational achievement, with more precarious jobs. The last cluster comprises good quality jobs, mostly with indefinite labour contracts, with workers with university degrees and median earnings close to four times the minimum wage. We statistically tested the differences between the informality definition and our method and found that the traditional measures have an important correlation with the clusters resulting from our model.

Keywords: Labour informality; clustering methods; unsupervised machine learning; segmented market hypothesis (search for similar items in EconPapers)
JEL-codes: C38 J21 J23 J42 J82 (search for similar items in EconPapers)
Pages: 27
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
https://revistas.unal.edu.co/index.php/ede/article/view/110808/94403
https://revistas.unal.edu.co/index.php/ede/article/view/110808/94403

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:col:000418:022888

DOI: 10.15446/ede.v34n65.110808

Access Statistics for this paper

More papers in Ensayos de Economía from Universidad Nacional de Colombia Sede Medellín Contact information at EDIRC.
Bibliographic data for series maintained by Universidad Nacional de Medellín ( this e-mail address is bad, please contact ).