Willingness to Pay for Formal Job Attributes : A Discrete Choice Experiment in Colombian Mom-and-Dad Stores

Informal workers in low- and middle-income countries are vulnerable to economic shocks since their jobs lack health and retirement benefits. Are workers informal because they do not value these benefits offered by formal jobs? Using a discrete choice experiment on a random sample of 2,900 “mom-and-dad” store owners and employees in Colombia, we estimate their willingness to pay (WTP) for formal jobs benefits, namely health and retirement plans. We find that, on average, workers are willing to forego up to 28% and 37% of their earnings to access formal health and retirement benefits, respectively. In contrast to previous research, which suggests that workers’ low WTP for benefits induced them to become informal under expansions of free or subsidized health insurance programs, our WTP estimations suggest that workers actually highly value these benefits