{
  "title": "Informality and Aggregate Productivity: The Case of Mexico",
  "publication": "IMF Working Papers, November 27, 2019",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2019/11/27/informality-and-aggregate-productivity-the-case-of-mexico-48754",
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  "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.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Objective: Assess the aggregate productivity impact of distortions arising from labor regulations in Mexico and how they interact with informality.\n- Approach: Use employment surveys and a firm-level economic census to document features of informal firms; construct and estimate a model of heterogeneous firms and endogenous informality to study micro and macro impacts of policy reforms.\n- Principal summary finding: Some reforms may have large impacts on informal employment but small impacts on aggregate productivity."
    },
    {
      "heading": "Data and empirical findings",
      "content": "- Data sources:\n  - Employment surveys (unspecified in the summary).\n  - Firm-level economic census (unspecified in the summary).\n- Empirical contribution: Document a number of novel features about informal firms in Mexico."
    },
    {
      "heading": "Model and methodology",
      "content": "- Model type: Heterogeneous firms with endogenous informality.\n- Key modeling elements (as described):\n  - Firm value function.\n  - Firm's idiosyncratic productivity.\n  - Profit function.\n  - Size distribution and classification of incumbent firm versus unproductive firm.\n  - Endogenous decision to operate informally or formally."
    },
    {
      "heading": "Key findings and analysis",
      "content": "- Aggregate productivity impact assessment:\n  - Distortions from labor regulations interact with informality to affect aggregate productivity.\n  - Micro and macro impacts of policy reforms are evaluated through the estimated model.\n- Principal quantitative conclusion reported in the summary:\n  - Some reforms may have large impacts on informal employment but small impacts on aggregate productivity."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Implication: Policy reforms targeting informality can substantially change informal employment shares.\n- Caveat: Large reductions in informality do not necessarily translate into large gains in aggregate productivity, according to the model-based analysis.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2019/11/27/informality-and-aggregate-productivity-the-case-of-mexico-48754"
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    "Authors: Jorge A Alvarez, Cian Ruane",
    "Published: November 27, 2019",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781513519920.001",
    "Objective: Assess the aggregate productivity impact of distortions arising from labor regulations in Mexico and how they interact with informality.",
    "Approach: Use employment surveys and a firm-level economic census to document features of informal firms; construct and estimate a model of heterogeneous firms and endogenous informality to study micro and macro impacts of policy reforms.",
    "Principal summary finding: Some reforms may have large impacts on informal employment but small impacts on aggregate productivity.",
    "Data sources:",
    "Empirical contribution: Document a number of novel features about informal firms in Mexico.",
    "Model type: Heterogeneous firms with endogenous informality.",
    "Key modeling elements (as described):",
    "Aggregate productivity impact assessment:",
    "Principal quantitative conclusion reported in the summary:",
    "Implication: Policy reforms targeting informality can substantially change informal employment shares.",
    "Caveat: Large reductions in informality do not necessarily translate into large gains in aggregate productivity, according to the model-based analysis.",
    "**Working Paper**"
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