Heterogeneous labour demand in the Colombian manufacturing sector

Luis E Arango,Francesca Castellani,Nataly Obando

doi:10.1186/s12651-018-0252-x

Abstract

Using the Colombian Annual Manufacturing Survey between 2000 and 2013, we investigate the heterogeneity in labour demand within the industrial sector based on the elasticities. We find that long-run own-price, output, and TFP elasticities vary across a variety of dimensions such as regions, sectors, and plant sizes depending on workers’ skills and contract modalities (open-ended and temporary). The determinants of industrial labour demand are quantitatively different, mainly, across regions and, to some extent, subsectors when we focus on demand for unskilled workers. It is possible that, given the importance of apparel in the manufacturing sector in Pereira, labour demand for permanent skilled workers in that city is different from that of Bogotá, Cali, and Medellín. Thus, labour demand heterogeneity is just a symptom of the underlying differences in the production processes and produced goods, technologies, labour force qualification and productivity, preferences of workers, rigidities and wage-setting procedures, and peculiarities of goods’ markets, etc. Suggestions to induce more wage flexibility and decrease labour segmentation emerge from this paper.

Highlights

The Colombian labour market is fraught with regional differences
Less-skilled workers face higher adjustment costs. Resting on all this literature and the findings of Arango et al (2013) on the heterogeneity of the labour market outcomes in Colombia, this paper explores industrial labour demand, taking into account the potential regional, subsector, and size disparities, in the line of Adam and Moutos (2014) and Judzik 2015.4 To this end, we use the information from the Annual Manufacturing Survey (AMS) between 2000 and 2013
We show the results of the homogeneity test for permanent workers, where w, y and tfp stand for real wage, output and total factor productivity (TFP)

Summary

Introduction

The Colombian labour market is fraught with regional differences. While these disparities might not be particular to Colombia, their intensity and persistence over time is quite significant (Arango et al 2013). In the case of conditional labour demand, the long-run own-price elasticity fluctuates between − 0.256, for skilled temporary, and − 1.109, for unskilled permanent workers.

Results

Conclusion