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Informality and productivity in the labor market in Peru

Author

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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 & Francis Journals, vol. 11(4), pages 229-245.
  • Handle: RePEc:taf:jpolrf: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. Alberto Chong & José Galdo, 2006. "Does the Quality of Training Programs Matter? Evidence from Bidding Processes Data," Research Department Publications 4451, Inter-American Development Bank, Research Department.
    2. 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 for the Study of Labor (IZA).

    More about this item

    Keywords

    informality; employment; labor costs; training; Peru;

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