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A Statistical Analysis of Heterogeneity on Labour Markets and Unemployment Rates in Colombia

No. 75 (2015-01-01)
  • Camilo Alberto Cárdenas Hurtado
    1Banco de la República. Bogotá, Colombia. Corresponding author. ccardehu@banrep.gov.co.
  • María Alejandra Hernández Montes
    2Banco de la República. Bogotá, Colombia. mhernamo@banrep.gov.co.
  • Jhon Edwar Torres Gorron
    3Banco de la República. Bogotá, Colombia. jtorrego@banrep.gov.co.
https://doi.org/10.13043/dys.75.4

Abstract

In this paper, we study the structural factors that determine the differences in unemployment rates and in labour market performance for Colombian cities. Using cross-sectional data for 23 metropolitan areas, we apply an extension of a principal axes method—Multiple Factor Analysis for Multiple Contingency Tables (MFACT)—in order to identify unobservable factors that are relevant when disentangling the heterogeneity observed among groups of variables considered explanatory of regional unemployment differentials. Our findings suggest that differences in qualified labour supply levels, participation incentives and age structure are important when it comes to understanding regional heterogeneity in terms of labour markets and unemployment rates in Colombia. In addition, clustering methods reveal that cities that display high unemployment rates do not necessarily share the same structural characteristics; that is, labour market frictions that give rise to unemployment are not the same across Colombian cities.

Keywords: Heterogeneous unemployment rates, regional labour markets, factor analysis

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