Documentos de Trabajo sobre Economía Regional y Urbana - Municipal informality in Colombia

Acosta-Ordoñez, Karina
Jaramillo-Echeverri, Juliana
Lasso Jaramillo, Daniel
Sarasti-Sierra, Alejandro

The series Documentos de Trabajo Sobre Economía Regional y Urbana is a publication of Banco de la República in Cartagena. The opinions contained in this document are the sole responsibility of the authors and do not commit Banco de la República or its Board of Directors. 

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It is estimated that more than 50 % of the labor force in Colombia belongs to the informal sector, a persistent phenomenon over the last three decades. Despite extensive literature on informality and its determinants at the national level or in the main urban areas, municiapl informality rates remain unexplored in the country due to the lack of availability and quality of data. In general, the information necessary to measure sub-national informality, whether through frm size, afliation to social security, or the existence of a written contract, is scarce or incomplete, making direct estimation difcult. This study proposes a measurement exercise to contribute to the study of informality in Colombia, estimating municipal  informality between 2005 and 2021. The results show that, although informality is persistently high, it is strongly concentrated. Furthermore, it is observed that, although informality gradually declined between 2005 and 2016 in all municipalities, those with higher informality rates experienced a setback in these gains in 2021.