Economics

Italo Lopez Garcia

I am a sixth year PhD student. My research interests include Applied Econometrics, Development, Labor Economics and Policy Evaluation. In my thesis dissertation I study the evaluation of human capital development policies using structural dynamic models combined with experimental data.

In my job market paper I estimate a life-cycle model to study the incentives to labor informality and self-employment using Chilean longitudinal data. In a second co-authored paper, we estimate a model of parental investments in children to analyze whether the timing of parental incomes matter for child human capital accumulation. In a third co-authored paper, we investigate the role of parental beliefs in cognitive and non-cognitive stimulation and child development, by evaluating a nationally-scaled parenting program in Chile, and by estimating models of parental investments in children with learning.

My professional career also involves three years of work as a World Bank Consultant designing and coordinating the impact evaluation of a large-scale parenting program in Chile, and five years of experience as a planning and financial engineer in private companies.


Primary:

  • Applied Micro
  • Development
  • Labour Economics

Secondary:

  • Policy Evaluation
  • Economics of Education
  • Early Child Development

Human Capital and Labor Informality in developing countries: A life-cycle approach

Abstract Labor informality account for nearly 40% of the labor force in Latin America. While a more traditional view sees this phenomenon as a consequence of barriers to mobility produced by poorly designed labor regulations, recent work provides evidence that individuals choose informal jobs based on their comparative advantage. In this paper, I develop a dynamic life-cycle model estimated with rich Chilean longitudinal data, in which individuals jointly decide schooling and labor participation, to investigate the extent to which comparative advantage drives participation in informal labor markets. Labor markets in Chile have been documented to be fairly competitive, providing a unique setting to test for the comparative advantage approach to informality.

This way, I explore three potential mechanisms: First, the importance that individuals assign to wages relative to the valuation of non-wage sector attributes; Second, whether individuals accumulate sector-specific human capital with heterogeneous returns; and Third, the importance of labor market expectations driving labor and schooling choices. Heterogeneous returns are included by modeling unobserved heterogeneity that jointly determine schooling and sector-specific productivity.

Model estimates suggest that comparative advantage is an important source of selection into informal jobs. I find evidence that human capital differs across sectors. In particular, High School returns are larger in the formal sector, there is a wage premium to College in the informal sector, and unlike informal experience, formal experience is positively rewarded in formal and informal jobs. In addition, more educated individuals give a higher importance to non-wage sector attributes, particularly in the formal sector, while low-educated individuals value more wage returns, particularly in the informal sector. Using the model to study the effects of recently implemented policies, I find that a wage subsidy to formal youth employment would increase high school participation and it would persistently reduce informality over the life-cycle, which serves to prove the importance of labor market expectations. Finally, I also find some evidence of barriers to mobility to the formal sector.


Working paper 1:  Does the timing of parental income shocks matter?
Working paper 2: The role of parental beliefs in cognitive and non-cognitive stimulation, and child development.