Human Capital and Women’s Informal Work: Theory and Evidence
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Informal employment among developing countries’ women continues to impair their emancipation from chronic poverty, although there has been progress in recent decades. In sub-Saharan Africa, not only do women lag behind men in educational attainments, they are also overrepresented in low-paid informal employments. In the literature, marriage and childbearing are seen to be the cause of both low educational attainments and high prevalence of informal employment among sub-Saharan African women. However, this prediction ignores the significance of human capital as a determinant of employability in the formal sector. In this paper, we use micro-level data from Niger in combination with the instrumental variables approach to analyze the causal effect of a female’s level of education - a proxy for human capital - on the likelihood of informal employment. A theoretical job-search model highlighting the mechanism driving this causal effect guides our empirical analysis. We find that an additional year of schooling completed lowers the probability that a female is informally employed by 3.99% to 6.12%. Our theoretical model explains this relationship by the fact that, in informal employments, the opportunity cost of leisure and childbearing rises with a female education, due to the flexibility of hours worked for this type of employment.
Abstract
Informal employment among developing countries’ women continues to impair their emancipation from chronic poverty, although there has been progress in recent decades. In sub-Saharan Africa, not only do women lag behind men in educational attainments, they are also overrepresented in low-paid informal employments. In the literature, marriage and childbearing are seen to be the cause of both low educational attainments and high prevalence of informal employment among sub-Saharan African women. However, this prediction ignores the significance of human capital as a determinant of employability in the formal sector. In this paper, we use micro-level data from Niger in combination with the instrumental variables approach to analyze the causal effect of a female’s level of education - a proxy for human capital - on the likelihood of informal employment. A theoretical job-search model highlighting the mechanism driving this causal effect guides our empirical analysis. We find that an additional year of schooling completed lowers the probability that a female is informally employed by 3.99% to 6.12%. Our theoretical model explains this relationship by the fact that, in informal employments, the opportunity cost of leisure and childbearing rises with a female education, due to the flexibility of hours worked for this type of employment.
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