Title:
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Rates of return to education, wage differentials and earnings dispersion during the structural adjustment in Colombia, 1984-1994.
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This thesis investigates the determinants of wages in Colombia, the wage differential
between public and private workers and earnings dispersion for wage workers and the selfemployed
between 1984-1994.
It attempts to determine how important education and expenence are in determining
individual earnings, emphasising the analysis of rates of return to education using the
Mincerian framework. It also examines the importance of the human capital model in
determining earnings, particularly for the self-employed. A model is developed in this case
for an endogenous treatment of sectoral choice in order to correct for potential selectivity
bias. Estimates are presented for the rates of return to education for both wage workers
and the self-employed using data drawn from the "National Household Survey" in tcn
Colombian cities, in June 1984, 1988, 1992 and 1994. Rates of return to education merit
special attention for two principal reasons: firstly, previous studies in Colombia show a
secular decline in the returns to education; secondly, changes in the relative demand for
skilled/unskilled workers were anticipated after trade liberalisation and these changes may
affect rates of return to education.
This dissertation also examines the size of the public wage pay differential in the Colombian
labour market during the period of structural adjustment. A further objective is to
determine the extent to which it was affected by public sector reform. It is worth noting
that the public sector wage differential has not been the subject of analysis in Colombia
since 1983.
Finally, wage distribution in Colombia during the structural adjustment is analysed. Debate
in Colombia has focused on wage distribution. The latter is closely related to human capital
and its market price, both of which have changed during the period. A chief aim of this
dissertation consists in determining how the changes in the rates of return to education that
occurred during structural adjustment explain the increased wage inequality observed
during the early 90s.
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