## Informality in Paraguay: Macro-Micro Evidence and Policy Implications

_IMF Working Papers, November 24, 2015_

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## Bibliographic details
- Authors: Mauricio Vargas
- Published: November 24, 2015
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513529271.001

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### Summary and key findings
- Informal activity represents more than half of total employment in Paraguay.
- Paraguay’s informality rate is higher than those observed in its Latin American and the Caribbean peers.
- The informal sector absorbs the most vulnerable workers.
- Informality affects negatively medium and large firms in the formal sector.
- The optimal combination of policies to reduce informality is not straightforward and needs to reflect the specific circumstances and objectives of the country.

### Determinants of informality
- Theoretical and empirical considerations identify regulations, enforcement policies, and government effectiveness as the ultimate determinants of informality.
- Paraguay performs weakly in regulations, enforcement policies, and government effectiveness compared to regional peers.

### Micro-evidence from surveys
- Household and enterprise surveys are used to characterize the informal sector’s labor absorption and its impact on formal firms.
- Findings indicate the informal sector primarily absorbs the most vulnerable workers.
- Medium and large formal firms are negatively affected by the presence of informality.

### DSGE model simulations and policy implications
- DSGE model simulations are used to assess policy options to reduce informality.
- Simulations suggest that the optimal policy mix is context-dependent and not straightforward.
- Policy design should reflect Paraguay’s specific circumstances and policy objectives.

### Publication and metadata
- By Mauricio Vargas
- November 24, 2015
- Pages: 33
- Volume: 2015
- Issue: 245
- Series: Working Paper No. 2015/245
- DOI: https://doi.org/10.5089/9781513529271.001
- Stock No: WPIEA2015245
- ISBN: 9781513529271
- ISSN: 1018-5941
- Subject: Economic sectors, Income inequality, Informal economy, Informal employment, Labor, National accounts, Personal income
- Keywords: Central Asia, enterprise survey, firm, firm size criterion, firms in Paraguay, firms in the service, Income inequality, Informal Economy, Informal employment, informal firm, Labor Regulations, Personal income, Sub-Saharan Africa, Tax System, worker, WP

*Source: Informality in Paraguay: Macro-Micro Evidence and Policy Implications, Mauricio Vargas, IMF Working Papers 2015, 245 (2015).*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/informality-in-paraguay-macro-micro-evidence-and-policy-implications-43417_