Trade-Openness Effects Through Price Channels on Sectoral Informal Employment: The Case of Peru

Abstract

Increasing trade-openness and the commodities boom were the main external factors driving economic growth in Latin American countries during the last decade. However, the economic expansion did not lead to better working conditions according to informal employment rates reported by the ILO.

This paper contributes to the literature by proposing a simple structural model that explain such relationship at the sectoral level. The parameters of proposed model are estimated for the Peruvian economic sectors for the period 2011-2014. The evidence suggests the presence of structural sector specific informality traps and raises awareness regarding the need of sector specific regulatory frameworks.

Keywords: Informal labor,Trade-openness

JEL Classification: J460; F660