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Modeling economic behavior in Peru's informal urban retail sector


  • Smith, J. Barry
  • Stelcner, Morton


In Lima, Peru, the informal sector makes up half the labor force, accounts for 61 percent of the hours worked, and generates an astounding 39 percent of GDP. More than half the street vendors are women. In the informal sector, the free play of market forces determines returns to productive factors, especially labor. Informal enterprises are concentrated in low-income areas of urban centers. The authors analyze Peru's urban informal sector - particularly women's role in it - based on a theoretical model of informal retail trade. They address these questions: what factors explain differences in the performanceof retail busineesses? If these can be identified, what types of policy initiatives might improve the performance of firms, especially those run by women? The authors recommend : channeling credit to small businesses, promoting cooperatives and self-help associations, providing technical assistance in basic management, making it easier and cheaper to get business licenses and facilitating cooperative child care centers.

Suggested Citation

  • Smith, J. Barry & Stelcner, Morton, 1990. "Modeling economic behavior in Peru's informal urban retail sector," Policy Research Working Paper Series 469, The World Bank.
  • Handle: RePEc:wbk:wbrwps:469

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    References listed on IDEAS

    1. Aman Ullah, 1988. "Non-parametric Estimation of Econometric Functionals," Canadian Journal of Economics, Canadian Economics Association, vol. 21(3), pages 625-658, August.
    2. Bromley, Ray, 1978. "Introduction - the urban informal sector: Why is it worth discussing?," World Development, Elsevier, vol. 6(9-10), pages 1033-1039.
    3. Mazumdar, Dipak, 1976. "The urban informal sector," World Development, Elsevier, vol. 4(8), pages 655-679, August.
    4. Florence E. Babb, 1984. "Women in the Marketplace: Petty Commerce in Peru," Review of Radical Political Economics, Union for Radical Political Economics, vol. 16(1), pages 44-59, March.
    5. Strassmann, W Paul, 1987. "Home-Based Enterprises in Cities of Developing Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 36(1), pages 121-144, October.
    6. House, William J, 1984. "Nairobi's Informal Sector: Dynamic Entrepreneurs or Surplus Labor?," Economic Development and Cultural Change, University of Chicago Press, vol. 32(2), pages 277-302, January.
    7. Chiswick, Carmel U, 1983. "Analysis of Earnings from Household Enterprises: Methodology and Application to Thailand," The Review of Economics and Statistics, MIT Press, vol. 65(4), pages 658-662, November.
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    Cited by:

    1. Paula Kantor, 2002. "Gender, Microenterprise Success and Cultural Context: The Case of South Asia," Entrepreneurship Theory and Practice, , vol. 26(4), pages 131-143, July.
    2. Elson, Diane, 1995. "Gender Awareness in Modeling Structural Adjustment," World Development, Elsevier, vol. 23(11), pages 1851-1868, November.


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