Informality in Paraguay: Macro-Micro Evidence and Policy Implications
Electronic Access:
Free Download. Use the free Adobe Acrobat Reader to view this PDF file
Summary:
Paraguay’s economy features a high degree of informality. Based on different estimation approaches, informal activity represents more than half of total employment in Paraguay, a higher rate than those observed in its Latin American and the Caribbean peers. Theoretical and empirical considerations support the notion that regulations, enforcement policies, and government effectiveness are the ultimate determinants of informality. In all of these areas Paraguay performs weakly compared to regional peers. Using household and enterprise surveys, we find that Paraguay’s informal sector absorbs the most vulnerable workers but affects negatively medium and large firms in the formal sector. DSGE model simulations suggest that the optimal combination of policies to reduce informality is not straightforward, and needs to reflect the specific circumstances and objectives of the country.
Series:
Working Paper No. 2015/245
Subject:
Economic sectors Income inequality Informal economy Informal employment Labor National accounts Personal income
English
Publication Date:
November 24, 2015
ISBN/ISSN:
9781513529271/1018-5941
Stock No:
WPIEA2015245
Pages:
33
Please address any questions about this title to publications@imf.org