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Informality and productivity in the labor market in Peru

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  • Alberto Chong
  • Jose Galdo
  • Jaime Saavedra

Abstract

This article analyzes the evolution of informal employment in Peru from 1986 to 2001. Contrary to what one would expect, the informality rates increased steadily during the 1990s despite the introduction of flexible contracting mechanisms, a healthy macroeconomic recovery, and tighter tax codes and regulation. We explore different factors that may explain this upward trend including the role of labor legislation and labor allocation between/within sectors of economic activity. Finally, we illustrate the negative correlation between productivity and informality by evaluating the impacts of the Youth Training PROJOVEN Program that offers vocational training to disadvantaged young individuals. We find significant training impacts on the probability of formal employment for both males and females.

Suggested Citation

  • Alberto Chong & Jose Galdo & Jaime Saavedra, 2008. "Informality and productivity in the labor market in Peru," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 11(4), pages 229-245.
    • Handle: RePEc:taf:jecprf:v:11:y:2008:i:4:p:229-245
    DOI: 10.1080/17487870802543480
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    References listed on IDEAS

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    1. Tokman, Víctor E. & Martínez, Daniel, 1999. "Costo laboral y competitividad en el sector manufacturero de América Latina, 1990-1998," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    2. Chong, Alberto & Galdo, Jose C., 2006. "Does the Quality of Training Programs Matter? Evidence from Bidding Processes Data," IZA Discussion Papers 2202, Institute of Labor Economics (IZA).
    3. John T. Addison & Paulino Teixeira, 2003. "The Economics of Employment Protection," Journal of Labor Research, Transaction Publishers, vol. 24(1), pages 85-129, January.
    4. Eduardo Maruyama & Jaime Saavedra, 2000. "Estabilidad laboral e indemnización: efectos de los costos de despido sobre el funcionamiento del mercado laboral peruano," Otras investigaciones, Consorcio de Investigación Económica y Social.
    5. Jaime Saavedra Chanduví & Eduardo Maruyama Sasaki, 2000. "Estabilidad laboral e indemnización: efectos de los costos de despido sobre el funcionamiento del mercado laboral peruano," Documentos de Investigación dt28, Grupo de Análisis para el Desarrollo (GRADE).
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    Cited by:

    1. Basu, Arnab K. & Chau, Nancy H. & Siddique, Zahra, 2011. "Tax Evasion, Minimum Wage Non-Compliance and Informality," IZA Discussion Papers 6228, Institute of Labor Economics (IZA).
    2. Miguel JARAMILLO BAANANTE & Daniela CAMPOS UGAZ, 2023. "Revisiting the stepping‐stone hypothesis: Transitions from temporary to permanent contracts in Peru," International Labour Review, International Labour Organization, vol. 162(2), pages 199-221, June.
    3. Janice Tripney & Jorge Hombrados & Mark Newman & Kimberly Hovish & Chris Brown & Katarzyna Steinka‐Fry & Eric Wilkey, 2013. "Technical and Vocational Education and Training (TVET) Interventions to Improve the Employability and Employment of Young People in Low‐ and Middle‐Income Countries: A Systematic Review," Campbell Systematic Reviews, John Wiley & Sons, vol. 9(1), pages 1-171.
    4. Rentería, José María, 2023. "The collateral effects of private school expansion in a deregulated market: Peru, 1996–2019," International Journal of Educational Development, Elsevier, vol. 102(C).
    5. Luca Zanin, 2021. "On the estimation of Okun’s coefficient in some countries in Latin America: a comparison between OLS and GME estimators," Empirical Economics, Springer, vol. 60(3), pages 1575-1592, March.
    6. Luis Alberto Beccaria & Sonia Marina Filipetto & Nahuel Mura, 2022. "Heterogeneidad en el sector informal y transiciones entre estados. Un análisis de largo plazo para el mercado laboral argentino," Revista Desarrollo y Sociedad, Universidad de los Andes,Facultad de Economía, CEDE, vol. 92(6), pages 195-235.
    7. Abbas Khandan & Masoud Nili, 2014. "Government interventions and the size of the informal economy. The case of Iran (1971-2007)," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 17(1), pages 71-90, March.
    8. Camila Cisneros-Acevedo, 2021. "Unfolding Trade Effect in Two Margins of Informality. The Peruvian Case," CESifo Working Paper Series 9114, CESifo.

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