Combating Informal Employment in Latin America: A Critical Evaluation of the Neo-Liberal Policy Approach

Research in World Economy Vol. 5, No. 2; 2014

13 Pages Posted: 24 Dec 2015

See all articles by Colin Williams

Colin Williams

University of Sheffield - School of Management

Youssef Youssef

Carleton College

Date Written: 2014

Abstract

This paper evaluates critically the neo-liberal perspective which contends that informal employment results from high taxes, public sector corruption and too much state interference in the free market and that the consequent remedy is to reduce taxes, public sector corruption and the regulatory burden via minimal state intervention. Reporting International Labor Organization data on the cross-national variations in the level of informal employment across 16 Latin American economies, and analyzing the economic and social conditions across these countries, no support is found for the neo-liberal tenets that higher tax rates, greater levels of corruption and state interference are correlated with higher levels of informal employment. Instead, higher levels of regulation and state intervention are associated with lower (not higher) levels of informal employment resulting in a tentative call for more, rather than less, regulation of the economy and state intervention to protect workers. The theoretical and policy implications are discussed.

Keywords: informal economy, economic development, developing countries, Latin America

JEL Classification: H26, J46, J48, K34, K42, O17, P2, P3

Suggested Citation

Williams, Colin and Youssef, Youssef, Combating Informal Employment in Latin America: A Critical Evaluation of the Neo-Liberal Policy Approach (2014). Research in World Economy Vol. 5, No. 2; 2014, Available at SSRN: https://ssrn.com/abstract=2707316

Colin Williams (Contact Author)

University of Sheffield - School of Management ( email )

15 Conduit Road
Sheffield, S10 1FL
United Kingdom

HOME PAGE: http://https://www.sheffield.ac.uk/management/staff/williams/index

Youssef Youssef

Carleton College ( email )

One North College St.
Northfield, MN 55057
United States

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