Informality and Productivity

Arturo Antón-Sarabia and Rodolfo Gutierrez ()
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Rodolfo Gutierrez: Ministry of Finance, Mexico

Economics Bulletin, 2016, vol. 36, issue 1, 205-217

Abstract: We examine the role of productivity differences across countries to explain the negative relationship between GDP per capita and informality in the data. Through the lens of a formal-informal two-sector model, we find that differences in overall and sector-specific productivities replicate the relationship between informality and GDP per capita and may explain up to 40 percent of the differences in informality. The dispersion in overall productivity induces most of the variation in output per worker in the informal sector.

Keywords: Informal sector; productivity; GDP per capita (search for similar items in EconPapers)
JEL-codes: E2 O4 (search for similar items in EconPapers)
Date: 2016-02-11
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