Informality and Aggregate Productivity: The Case of Mexico

44 Pages Posted: 22 Jan 2020

See all articles by Jorge Alvarez

Jorge Alvarez

International Monetary Fund (IMF)

Cian Ruane

International Monetary Fund (IMF)

Date Written: November 2019

Abstract

We assess the aggregate productivity impact of distortions arising from labor regulations in Mexico and how they interact with informality. Using employment surveys and a firm-level economic census, we document a number of novel features about informal firms in Mexico. We then construct and estimate a model of heterogeneous firms and endogenous informality to study the micro and macro impacts from various policy reforms. Some reforms may have large impacts on informal employment but small impacts on aggregate productivity.

Keywords: Social safety nets, Economic conditions, Informal sector, Social security, Labor costs, Informality, Misallocation, Productivity, Growth, Mexico., WP, informal worker, formal sector, entry cost

JEL Classification: D22, E26, H26, J46, O14, O17, E01, E2, I3, Z13, J3

Suggested Citation

Alvarez, Jorge and Ruane, Cian, Informality and Aggregate Productivity: The Case of Mexico (November 2019). IMF Working Paper No. 19/257, Available at SSRN: https://ssrn.com/abstract=3523130

Jorge Alvarez (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

HOME PAGE: http://https://sites.google.com/site/jalvarezecon/

Cian Ruane

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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