IMF Working Papers

Informality and Aggregate Productivity: The Case of Mexico

By Jorge A Alvarez, Cian Ruane

November 27, 2019

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Jorge A Alvarez, and Cian Ruane. Informality and Aggregate Productivity: The Case of Mexico, (USA: International Monetary Fund, 2019) accessed October 13, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

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.

Subject: Expenditure, Informal employment, Labor, Production, Productivity, Public expenditure review, Self-employment, Wages

Keywords: Aggregate productivity impact, Firm value function, Firm's idiosyncratic productivity, Firms in Mexico, Front matter page, Idiosyncratic productivity, IMF working papers, Incumbent firm, Informal employment, Informal firm, Policy reform, Productivity, Profit function, Public expenditure review, Self-employment, Size distribution, Unproductive firm, Wages, WP

Publication Details

  • Pages:

    43

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2019/257

  • Stock No:

    WPIEA2019257

  • ISBN:

    9781513519920

  • ISSN:

    1018-5941