Analysis of the informal sector in colombia in the late 2010’s

We study the weight of informality in the Colombian labour market and wage consequences in extensive and intensive margins. Using EMICRON (Encuesta de Micronegocios 2019) data over 86,969 micro and small firms, our analysis show that four fifths operate in the informal sector and employ more than two thirds of workers.We also find a high intensive margin of informality in the Colombian context. The differentials in performance between formal and informal firms are not systematically related to industries in which they operate, but to internal characteristics of both sectors in terms of size and productivity. Our econometric estimates on the wage gap are statistically significant.An informal worker is paid 85% less than a formal worker in extensive margin and 62% in intensive margin.These estimates also indicate that the minimum wage is a good variable for measuring informality among workers in Colombia.Finally, we find out that our results are very consistent with most literatures on informality and stylized facts in low and middle-income countries