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The Determinants of Informality in Mexico's States

Listed author(s):
  • Sean Dougherty


  • Octavio Escobar

    (ESG Management School of Paris)

Informality has important implications for productivity, economic growth, and the inequality of income. In recent years, the extent of informal employment has increased in many of Mexico's states, though highly heterogeneously. The substantial differences across states in terms of informal employment can be helpful in explaining differences in economic growth outcomes. This paper studies the determinants of informal employment using states' diverging outcomes to identify causal factors, taking into account potential endogeneity. The results suggest that multiple factors explain differences in informal employment across states, including per capita income, the quality of labour skills, differences in the prevalence of microenterprises, the cost to start a business, restrictions on foreign investment, the rule of law and incidence of corruption. Les déterminants de l'informalité dans les États du Mexique L’informalité a des implications importantes sur la productivité, la croissance économique et l’inégalité des revenus. Ces dernières années, la mesure de l’emploi informel a augmenté dans la plupart des États du Mexique, bien que de manière très hétérogène. Les différences importantes entre les États en matière d’emploi informel peuvent être utiles pour expliquer les différences dans les résultats de la croissance économique. Cet article étudie les déterminants de l’emploi informel en utilisant les résultats divergents des États pour identifier les facteurs causaux, en tenant compte de l’endogénéité potentielle. Les résultats suggèrent que plusieurs facteurs expliquent les différences dans l’emploi informel à travers les États, y compris le revenu par habitant, la qualité de la main-d’oeuvre, les différences dans la prévalence des microentreprises, le coût pour démarrer une entreprise, les restrictions sur les investissements étrangers, l’État de droit et l’incidence de la corruption.

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Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 1043.

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Date of creation: 11 Apr 2013
Handle: RePEc:oec:ecoaaa:1043-en
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