Informality and Productivity in the Labor Market: Peru 1986 - 2001

Jose Galdo, Jaime Saavedra and Alberto Chong

No 1958, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: Peru has one of the highest informality rates in Latin America, with almost 60 percent of the urban labor force working at the margins of labor market legislation or in microenterprises that lack basic labor market standards (Marcouiller, Ruiz de Castilla, and Woodruff, 1997). This paper identifies two factors that can explain the variation in informality rates in the 1990s. First, Peru experienced a steady increase in employment allocation in traditionally informal sectorsin particular, retail trade and transport. Second, there was a sharp increase in nonwage labor costs, despite a reduction in the average productivity of the economy. In addition, the paper illustrates the negative correlation between productivity and informality by evaluating the impacts of the PROJOVEN youth training program.

Keywords: WP-609 (search for similar items in EconPapers)
Date: 2007-07
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Working Paper: Informality and Productivity in the Labor Market: Peru 1986 - 2001 (2007)
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