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Labor Market Transitions in Peru


  • Javier Herrera

    () (DIAL, Paris)

  • Gerardo David Rosas Shady

    () (DIAL, Paris)


Traditional labor market analysis based solely on the net unemployment rate fails to explain the apparent paradox between a relatively moderate unemployment rate in Peru (around 10%, with a weak sensibility to wide macroeconomic fluctuations), and the fact that unemployment is one of the major issues in Peru. One possible explanation is that this static indicator of cross section net unemployment balance is compatible with high flows in and out of employment states. To address these issues we needed to conduct a dynamic analysis using panel data. Using the Peruvian national household survey (ENAHO), we constructed a panel of working age individuals at the national level for the period 1997-1999. Like previous work in developing countries, we found that there is an important degree of job mobility in Peru. We also found that most of the transitions occur between employment and inactivity instead of between employment and unemployment. We also showed that the rate of permanent unemployment is very low so that unemployment would be essentially a frictional phenomenon. Further, considering the different transition states, we elaborated an unconditional transition profile, including individual and household characteristics, like gender, age and education levels for example, associated with each transition status. Finally, after examining these labor market transitions and the possible sample selection bias, we estimated a multinomial logit model. This model allowed us to appreciate the (conditional) incidence of individual and household characteristics as well as the effects of different shocks on the labor transition states.

Suggested Citation

  • Javier Herrera & Gerardo David Rosas Shady, 2005. "Labor Market Transitions in Peru," Ibero America Institute for Econ. Research (IAI) Discussion Papers 109, Ibero-America Institute for Economic Research.
  • Handle: RePEc:got:iaidps:109

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    References listed on IDEAS

    1. Gong, Xiaodong & Van Soest, Arthur & Villagomez, Elizabeth, 2004. "Mobility in the Urban Labor Market: A Panel Data Analysis for Mexico," Economic Development and Cultural Change, University of Chicago Press, vol. 53(1), pages 1-36, October.
    2. Weller, Jürgen, 1998. "Los retos de la institucionalidad laboral en el marco de la transformación de la modalidad de desarrollo en América Latina," Series Históricas 10, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    3. Jaime Saavedra-Chanduví & Máximo Torero, 2000. "Labor Market Reforms and Their Impact on Formal Labor Demand and Job Market Turnover: The Case of Peru," IDB Publications (Working Papers) 3269, Inter-American Development Bank.
    4. Cecilia Garavito, 1999. "Empleo y desempleo: Un análisis de la elaboración de estadísticas," Revista Economía, Fondo Editorial - Pontificia Universidad Católica del Perú, issue 44, pages 103-144.
    5. Dancourt, Oscar, 1999. "Reforma neoliberal y política macroeconómica en el Perú," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    6. 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).
    7. Saavedra Chanduví, Jaime, 1999. "La dinámica del mercado de trabajo en el Perú antes y después de las reformas estructurales," Series Históricas 27, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
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    Cited by:

    1. Yamada, Gustavo & Montero, Ricardo, 2008. "Desempleo, pobreza y estrategias de protección social: Perú 1998-2005
      [Unemployment, poverty and social protection strategies: Peru 1998-2005]
      ," MPRA Paper 15294, University Library of Munich, Germany.
    2. José Rodriguez & Gabriel Rodriguez, 2012. "Explaining the Transition Probabilities in the Peruvian Labor Market," Documentos de Trabajo / Working Papers 2012-334, Departamento de Economía - Pontificia Universidad Católica del Perú.
    3. Shaimaa Yassin, 2014. "Job Accession, Separation and Mobility in the Egyptian Labor Market Over the Past Decade," Working Papers 881, Economic Research Forum, revised Nov 2014.

    More about this item

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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