Date of Award
Doctor of Philosophy (PhD)
Dr. Jose A. Pagan
Dr. Alberto Davila
Dr. Chad Richardson
This dissertation focuses on the contemporary informal labor sector in Nicaragua. Central to the study are four research questions concerning the informal labor sector in Nicaragua; they are: (1) Are Nicaraguans positively or negatively selected into the informal/formal sector? That is, do Nicaraguans participate in their respective sector by choice (e.g., positive selection) or by force (e.g., negative selection)? (2) Are Nicaraguans working in the informal sector queued to work in the formal sector? (3) How has the queue changed, if any, for informal sector workers desiring formal sector employment over the course of the 1990s? and, (4) How have informal/formal sector returns responded to labor market reforms in the 1990s?
In an attempt to answer these questions, two Nicaraguan national household surveys, the 1993 and 1998 Encuesta de Medición de Nivel de Vida or Living Standards Measurement Survey, containing individual level socio-economic information, were used to conduct econometric analysis and hypotheses testing. The results suggest that both informal and formal sector workers were positively selected—that is, informal sector workers choose informal sector employment as do formal sector workers when selecting formal sector employment. Furthermore, informal sector workers were found to queue for formal sector work with the queue becoming more pronounced over time. Lastly, formal sector earnings have responded favorably under the national economic transition to changes in the structure of the labor market, enlarging the wage gap between the formal and informal sectors over the 1990s. As expected, higher levels of education act as the primary determinant of formal sector employment driving a knowledge and earnings wedge between the two sectors.
A supplemental analysis of the self-employed was conducted revealing that the self-employed respond positively to downturns in the economy by becoming entrepreneurs. Conversely, when the economy improves, the self-employment sector becomes a refuge for workers.
University of Texas-Pan American