Informality and Aggregate Productivity: The Case of Mexico

Jorge Alvarez and Cian Ruane

No 2019/257, IMF Working Papers from International Monetary Fund

Abstract: We assess the aggregate productivity impact of distortions arising from labor regulations in Mexico and how they interact with informality. Using employment surveys and a firm-level economic census, we document a number of novel features about informal firms in Mexico. We then construct and estimate a model of heterogeneous firms and endogenous informality to study the micro and macro impacts from various policy reforms. Some reforms may have large impacts on informal employment but small impacts on aggregate productivity.

Keywords: WP; informal firm; size distribution; profit function; firm's idiosyncratic productivity; incumbent firm; firm value function; unproductive firm; firms in Mexico; idiosyncratic productivity; Informal employment; Productivity; Wages; Public expenditure review; aggregate productivity impact; IMF working papers; policy reform; front matter page; Self-employment (search for similar items in EconPapers)
Pages: 43
Date: 2019-11-27
New Economics Papers: this item is included in nep-dev, nep-dge, nep-eff and nep-iue
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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